Vivendi SA-ADR (OTCMKTS:VIVHY) (EPA:VIV) announced today that it will begin exclusive talks with billionaire Patrick Drahi’s cable holding Altice SA (AMS:ATC) regarding the sale of its French wireless carrier unit SFR. The French telecommunications giant had been evaluating two $20 billion plus competing offers for SFR, the other offer from Bouygues SA, the construction and media conglomerate led by Martin Bouygues, who was merge SFR with its own wireless unit Bouygues Telecom.
This was a somewhat unexpected move for Vivendi SA-ADR (OTCMKTS:VIVHY) (EPA:VIV), given the fact that Vivendi is choosing against the option preferred by French Industry Minister Arnaud Montebourg. Montebourg had publicly supported the bid from Bouygues SA.
“At the end of the three weeks, the supervisory board will meet again to examine the next steps and to decide if it should put an end to the other options envisaged,” Vivendi SA-ADR (OTCMKTS:VIVHY) (EPA:VIV) said in a statement released earlier today. The statement mentioned that Altice’s offer includes conditions for Vivendi to exit the combined company.
Drahi commented in a follow-up statement that he’s pleased with Vivendi’s decision. A Bouygues spokesperson said the company had no comment at this time.
Government to insist on “social considerations” to approve deal
Vivendi SA-ADR (OTCMKTS:VIVHY) (EPA:VIV)’s decision to reject the industry ministry’s choice is likely to complicate the approval of any deal. According to an anonymous French government official, President Hollande and his team have asked Vivendi to comply with a set of social considerations in structuring the deal.
The same official elaborated that no job losses in France (SFR employs more than 9,000 people), investing in the country’s networks and complete financial transparency of all holdings involved in all related transaction will be required for approval of the deal.
Industry Minister Montebourg told Europe1 radio station in an interview that Altice SA (AMS:ATC)’s bid could be risky for France because of the high debt Drahi would bring to the combined entity. “We know Mr. Bouygues and he said there wouldn’t be job cuts,” Montebourg explained. “The state is not the owner of the one or the other. The state expressed a preference. There are some problems: overwhelming debt, no competition in cable, fiscal problems. We are going to solve these problems now.”