Bouygues SA, the construction and telecommunications group led by Martin Bouygues, offered Euro 10.5 billion ($14.4 billion) in cash for Vivendi SA's SFR unit, setting up a bidding war with billionaire Patrick Drahi and potentially creating a phone carrier that could rival Orange SA.
Bouygues said its offer, which includes assets the Bouygues Telecom unit, would generate synergies of about Euro 10 billion with SFR. A separate proposal by Altice SA, the cable holding company backed by Drahi, values SFR at about $20 billion through a mixture of debt, cash and equity, people familiar with the matter said.
If Vivendi accepts either bid, it would have to scrap a plan to distribute SFR stock to shareholders. A disposal of SFR, which Vivendi took full control of in 2011, would represent a shift toward media assets including Canal+ and Universal Music Group under Vincent Bollore, who is set to replace Jean-Rene Fourtou as chairman this year.
Europe's largest media-to-telecommunications group will have to assess whether any proceeds from a sale would compensate for the political and antitrust risks. SFR joining Bouygues Telecom would create a carrier with more than 21 million contract wireless customers - closing a gap with market leader Orange SA. Such a deal is certain to attract intense regulatory scrutiny, people familiar with the situation have said.
Drahi's Bid
Vivendi's shares rose 1.7 percent to 20.91 euros at 9:16 a.m. in Paris, while Bouygues jumped 5.2 percent to 30.26 euros. Numericable fell 3.6 percent, and Altice added 0.6 percent in Amsterdam.
Drahi's bid includes about 11 billion euros in cash, 3 billion euros in Numericable's cable assets and a 750 million-euro capital increase by Altice, a person familiar with the matter has said.
Bids from Bouygues and Altice, connected with fixed-broadband competitor Numericable, come after calls for consolidation in an industry that has been battling falling prices since discounter Iliad SA (ILD) two years ago started offering packages as cheap as 2 euros a month.
Iliad, which had also weighed a bid for SFR, didn't submit an offer by yesterday's deadline.
Vivendi's supervisory board will now examine these two binding offers, the company said in a statement. It will consider all options available in the best interests of employees and shareholders, it said.
Antitrust Risks
Going from four mobile carriers to three in France is likely to involve a lengthy review by the French competition watchdog, while Numericable's proposed merger with SFR would probably avoid that because there is little overlap between their landline and wireless assets, people familiar with the matter have said. Bouygues's plans potentially hold more cost savings, the people said.
Under Bouygues's proposal, the company would get 49 percent of the new entity, while Vivendi would have 46 percent, with JCDecaux SA -- a minority shareholder of Bouygues Telecom -- holding the rest.
The new entity would hold an initial public offering, allowing Vivendi to sell a further 15 percent of the capital, Bouygues said. The deal is structured to give the new entity "the means for its development" and an investment grade status, Bouygues said.
The new telecom group would also sell new shares at the IPO, and would be ready to sell assets to meet antitrust requests, Bouygues CFO Philippe Marien said on a conference call today. It could raise about 3 billion euros in asset sales and through capital increase, Marien said. Bouygues wouldn't take part in the capital increase, he said.
