Numericable wins battle for Vivendi’s SFR

Vivendi to get at least €13.5bn cash for telecom unit, plus 20 per cent stake in new entity

France's Vivendi said it had accepted cable company Numericable's bid for its telecom unit SFR, which would give Vivendi at least €13.5 billion in cash plus a 20 per cent stake in the new entity.

The plan, which will be presented to unions and regulators for approval, effectively hands victory to Numericable's Franco-Israeli backer Patrick Drahi after a fierce month-long bidding war against fellow billionaire Martin Bouygues, whose family company owns France's No 3 mobile operator.

The agreed sale of SFR also promises to reshape Europe's third-biggest telecoms market after two years of fierce price competition, triggered by the arrival of low-cost player Iliad in the mobile arena.

Despite a sweetened, last- ditch offer from Bouygues – the outsider in the race but favoured by the French government – Vivendi said on Saturday it had picked Numericable as the better bid in terms of business logic, commitment to preserving jobs, chances of regulatory approval and long-term value.


'Most balanced'
Vivendi also said that Numericable's bid was "the most balanced" in terms of immediate cash payment and equity, even if Bouygues's latest proposal actually promised more cash upfront.

Numericable had offered €13.5 billion in cash, a milestone payment of €750 million – linked to underlying return on capital expenditure – and a 20 per cent stake in the new entity. Bouygues, meanwhile, had as of Friday offered €15 billion in cash and a 10 per cent stake.

“[Numericable’s bid] should represent a total value above €17 billion,” Vivendi said in its statement.

Bouygues’s bid as of Friday would have valued SFR at €16 billion before cost savings, or €16.5 billion including an “earn-out” clause of €500 million if certain targets were met.

Bouygues said in a statement following Vivendi’s decision that it had in fact made another sweetened offer Saturday morning for €15.5 billion in cash and a 5 per cent stake in the combined entity.

It insisted that its offer had given “more serious” guarantees on preserving jobs.

Front runner
Numericable was already considered the front runner after Vivendi's board chose it on March 14th for three weeks of exclusive talks. But persistent pressure from Bouygues forced it to sweeten its offer: its last public offer would have given Vivendi €11.75 billion in cash and a 32 per cent stake.

Both suitors for SFR were backed by billionaire businessmen who have put their all into the fight, lobbying France’s government for support, pledging not to cut jobs after the deal, and hitting up debt markets for funds to fuel their bids.

France's economy minister, Arnaud Montebourg, warned the government would be "vigilant" in making sure that promises to avoid job cuts were kept. – (Reuters)