France's Altice buys controlling stake in Suddenlink for $9.1B, sets up possible TWC run

Injecting a new element of complexity to a cable M&A wave that had been primarily focused on Charter Communications (NASDAQ: CHTR) and Time Warner Cable (NYSE: TWC), French telecom group Altice SA announced intentions to pay $9.1 billion for a controlling interest in Suddenlink Communications.

Billionaire Patrick Drahi, who owns Altice, has been pursuing European cable assets of late. This is his first purchase in the heated U.S. market. 

Altice plans to acquire 70 percent of Suddenlink from the St. Louis-based operator's private-equity firm owners, BC Partners and CPP Investment Board. BC Partners and the Canada Pension Plan Investment Board will retain a 30 percent stake in Suddenlink.

"Our investment in Suddenlink, our first in the cable sector in the U.S., opens an attractive industrial and strategic avenue for Altice in the U.S., one of the largest and fastest-growing communications markets in the world," Altice chief executive Dexter Goei said in a statement.

New Street Research's Jonathan Chaplin said the deal shows that U.S. cable companies are undervalued relative to other cable assets around the world.

"We have been pondering the multiple gap between the U.S. and Europe for some time wondering what could be different," Chaplin wrote in a note to investors Wednesday morning. "Altice's bid suggests perhaps that nothing is different; the US is too cheap."

The bid for one of the U.S. cable industry's few remaining mid-sized operators comes as Charter has renewed its intentions to buy Bright House Networks. 

It is believed Bright House is merely a stepping stone for Charter's end goal, the acquisition of No. 2 U.S. cable operator TWC. 

Analysts are already speculating that, in purchasing Suddenlink, Drahi has his eyes on the same prize--TWC. 

In a memo to staff Wednesday, Suddenlink CEO Jerry Kent wrote: "While our strong performance has afforded Suddenlink ready access to growth capital, we didn't have the financial resources to participate in some of the recent, widely reported potential acquisitions," Mr. Kent said. "The backing of Altice will better position the company to gain critical scale as a major consolidator in the U.S. cable industry."

For more:
- read this Altice press release
- read this Reuters story
- read this Wall Street Journal story

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