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Drahi hits Altice reset button to court wary investors

Reuters  |  PARIS/NEW YORK 

By and Anjali Athavaley

PARIS/NEW YORK (Reuters) - founder is reshaping his telecoms and cable group for the second time in as many months by splitting its U.S. and European operations, hoping to end a drastic downward share-price spiral.

Heavily indebted said it would spin off its U.S. arm, which owns the country's fourth-biggest cable operator, to existing investors, and would prioritise efforts to turn around its European operations including French

USA will pay a parting dividend of $1.5 billion to the European arm, to be named Divestments of non-core assets, some of which are already under way, should also help to pay down debt, said on Tuesday.

Analysts at brokerage said that Altice's European arm as a whole could eventually become an acquisition target for rival French telecoms companies.

"A separate listing of makes a sale of this asset easier, to or Iliad for instance, which could both consider market consolidation synergies in France, in our view," they wrote.

Dexter Goei, however, said that was not on the horizon.

"We're very focused on the operating story, specifically in and Portugal," Goei told reporters during a call. "Over the medium and longer term, I'm certain this question will be asked again and maybe we'll have a different response."

Altice's shares in closed 10.5 percent higher, partially offsetting their fall of about 50 percent in the past 12 months. USA had jumped by more than 15 percent by 1708 GMT.

The group's leveraged loans also rebounded strongly in Europe's secondary loan market.

The two companies will be led by separate management teams with Franco-Israeli billionaire Drahi retaining control of both and garnering a large share of the dividend as well as of a $2 billion share buyback planned by USA.

Dennis Okhuijsen, Altice's current chief financial officer, will become of and will continue to serve as of USA.

No new executive recruitment was announced, however, with remaining managed by the same close team that has seen it transform from a small France-based company into a global group.

Several analysts said that this light and centralised top management may hamper Altice's capacity to define an efficient and clear marketing strategy in each of its markets.

Altice, whose operations stretch from to the Dominican Republic, saw its shares plummet after a financial report signalled it would fail to grow in in 2017, despite large investments in

This led to the ousting of Altice's chief executive, a rare apology by Drahi to investors at a conference last year and the promise that Altice, whose debt equals more than twice its yearly revenues, would shift focus from large acquisitions to sales growth and


has grown rapidly through acquisitions in the and Europe, helped by cheap debt that has risen to around $60 billion -- more than five times its annual core operating profit.

In the United States, Drahi spent $28 billion in 2015 to buy cable companies and Cablevision, and even flirted with a $185 billion bid for cable giant

The company largely fulfilled its promise to cut costs aggressively at the businesses it bought but often failed to achieve the operational turnarounds and growth it targeted.

NV, which is based in the Netherlands, aims to complete the spinoff of its 67.2 percent interest in USA by the end of the second quarter, following regulatory and shareholder approvals.

The listed U.S. business, no longer owned by NV, will then be shielded from concerns about the European operations, while its liquidity will quadruple to 42 percent of total shares outstanding.

"With U.S. activities clearly split, the contagion effect will not be felt," said Thomas Coudry, an at Bryan, Garnier & Co.

Drahi will own 52 percent of and 43 percent of USA.

Altice's managers had in the past said that potential risks associated with the company's consolidated debt were alleviated by the so-called "silo structure" of the group, under which each entity would have to make its own repayments.

Drahi has recently shifted gears, saying there was a path to further strengthen the European balance sheet over the long term through non-core asset disposals, such as telecom towers.

is also hoping to raise as much as 3 billion euros from the sale of its business, sources told in November.

($1 = 0.8388 euros)

(Additional reporting by Sonam Rai and Supantha Mukherjee in Bengaluru; Additional reporting by Sudip Kar-Gupta and Leigh Thomas in Paris; Editing by Georgina Prodhan, and Susan Fenton)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Tue, January 09 2018. 23:17 IST