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Europe's Altice boosted by plans to spin off U.S. operation

Reuters  |  PARIS/NEW YORK 

By Thomas and Anjali Athavaley

PARIS/NEW YORK (Reuters) - Telecoms and cable group NV is separating its U.S. and European operations to try to reassure investors alarmed by its high debt and low generation, especially in its core French telecoms business.

said it would spin off its U.S. arm to existing investors and prioritise a turnaround of its European operations. Both companies will have new management.

Altice's battered shares -- down about 50 percent over the past year -- rose 6.6 percent in on Tuesday, boosted by hopes the breakup could open the door to a wider reorganisation and possibly allow it to offload problematic assets.

The U.S. business, no longer owned by NV, would be shielded from concerns about the European operation, while a parting $1.5 billion dividend payment will improve the balance sheet of the European arm.

"USA's shares have suffered from guilt by association with the weaker results at the European parent," said Craig Moffett, an at

"The biggest overhang on USA shares," he added in an email, "has been the nagging concern that U.S. shareholders might somehow be called upon to backstop weakness in That risk will now be gone."

Altice's performance in last year led investors to question its strategy, and in November founder returned as while resigned.

NV, which is based in the and will be renamed Europe, 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.

Turning around operations in and are the top goals for the European business.

NV's stock is down by about half over the last 12 months, while shares in the U.S. unit are down about 35 percent from their market debut last June.


has grown in the and through debt-fuelled acquisitions, raising its net debt to more than five times its annual core operating profit.

Drahi in a statement also said that there was a path to further strengthen the European balance sheet over the long term through non-core asset disposals.

Analysts at brokerage said Altice's European arm could 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," wrote in a research note.

"However, we doubt that the intention to sell is unlikely to be reached in the medium-term, as this would require a material discount to the price paid for these assets," it added.

The two companies will be led by separate management teams with Drahi retaining control of both companies.

will become of and will continue to serve as of USA.

Franco-Israeli tycoon Drahi will own 52 percent of the European business and 43 percent of the U.S. business.

The dividend to be paid to will add to USA's net debt, which was approximately $21.2 billion at the end of the third quarter of last year. USA also approved a $2 billion repurchase program of U.S. shares, once the separation is complete.

The U.S. dividend will provide an approximately 900 million euro cash injection to the European operation.

(Additional reporting by and in Bengaluru; Additional reporting by in Paris; Editing by and Keith Weir)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, January 09 2018. 16:28 IST