Altice USA Inc. (NYSE:ATUS) is considering approaching equity firms as it seeks to raise cash to finance the acquisition of Charter Communications. Reports indicate that the telecom giant is eyeing deals with Canada Pension Plan Investment Board and BC Partners to fund the proposed acquisition. Bloomberg reports that negotiations between Patrick Drahi’s Altice and the two equity firms are in early stages.
Altice-Charter Communications Merger Talk
A merger between Altice USA and Charter Communications will result in a broadband and pay TV powerhouse. However, the acquisition would be extremely expensive and tedious even as Drahi continues to explore ways of expanding into U.S territories. John Malone who controls 25% of Charter Communications will have to reduce his influence at the cable operator if the deal is to gain regulatory approval.
Charter comes into the acquisition discussions with a market cap of about $100 billion. However, it also has a debt of $60 billion that Altice with a market cap of $22 billion will have to take in, as part of any deal. Financing the deal with stock would considerably reduce the amount of money that Altice will have to pay.
Charter Communication acquisition would allow Altice USA to build more scale and save on costs associated with content production and distribution as it seeks to strengthen its position in the cable business. The company has been strengthening its position in the industry through acquisition having recently completed the acquisition of Cablevision for $17.7 billion. It also bought Suddenlink for $9.1 billion in 2015.
Bidding War
Altice is not expected to have it easy as it continues to pursue the acquisition of Charter Communications. Reports indicate that Softbank Corp may be interested in a deal and could be ready with an offer by the end of the month. The Japanese company reportedly plans to merge Charter Communications with Sprint Corp (NYSE:S) in which it owns a majority stake.
The telecom industry is expected to experience a wave of consolidation in the coming months as companies continue to explore ways of cutting costs fueled by the cord cutting menace.
Altice USA was up by 1.45% in Friday’s trading session to end the week at $31.49 a share.
