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Heavily indebted telecoms group Altice has agreed to sell a majority stake in its data centre business to a Morgan Stanley infrastructure fund as French-Israeli billionaire owner Patrick Drahi works to shore up the group’s finances.
Morgan Stanley Infrastructure Partners will take a 70 per cent stake in the network of 257 data centres across France at an enterprise value of €764mn. That is a multiple of around 29 times the company’s 2023 earnings before interest, tax, depreciation and amortisation of €26mn.
The sale is the first deal announced since Drahi said over the summer that Altice would explore selling assets alongside refinancing the group’s upcoming debt maturities. Investor concerns have mounted over the company’s $60bn debt pile — much of which was used to fund its expansion through acquisitions in the past decade — as interest rates have risen.
The company said the “transaction reflects Altice France’s strategy around balance sheet management, which notably includes executing inorganic deleveraging through proactive management of our non-core asset portfolio”.
The deal is expected to close in the first half of 2024 and will include a “build-to-suit” agreement with French mobile operator SFR that is expected to generate about €175mn over the next seven years.
Altice International, one of the three main companies of the group, borrowed €800mn from investors in October through a term loan in order to repay bonds maturing in 2025 at a rate of 5 percentage points over a floating rate benchmark.
Investment banks including Lazard, Goldman Sachs, Morgan Stanley and BNP Paribas have also been tapped to explore the sale of various assets, including a stake in SFR for around €3bn and Altice’s operations in Dominican Republic and Portugal. Bankers have also speculated Drahi could sell French news network BFM and some of his 25 per cent stake in BT.
“The impression is that everything could be for sale,” said a banker in Paris.
Liberty Media chair John Malone, known as the “cable cowboy” and whose use of leverage to fund deals served as a model for Drahi’s own ambitions, has become critical of the group’s handling of its debt pile.
“We’re in a period where we’re going to see very serious distress in our industry for companies that didn’t leverage prudently,” Malone said in a November interview with CNBC, pointing to Altice in particular. “It’s all toast . . . [Drahi]’s basically admitted that everything’s for sale, but you have all of this distressed debt that’s going to mature or go into default if it has covenants.”
A push into the US market has gone poorly for Drahi: since spinning off Altice USA from its European parent in 2018, the share price has collapsed by 93 per cent and the company has been losing subscribers.
The race to manage Altice’s debt comes as one of the group’s most senior executives was arrested over the summer in a corruption probe. The scandal involves the group’s co-founder Armando Pereira, who was placed under house arrest in Portugal in July, further spooking investors.
The criminal investigation centres on whether the 71-year-old executive worked with others to rig Altice’s procurement processes, with allegations that hundreds of millions of euros appeared to have been siphoned off illicitly. Altice has suspended a string of other senior executives around the world in the wake of the corruption probe. Pereira has previously denied wrongdoing.