Patrick Drahi’s attempt to take his European telecoms empire private faces another hurdle after London hedge fund Winterbrook Capital launched legal filings in the US to try to force the company’s advisers and an executive to issue documents about the deal ahead of formal litigation.
Altice Europe, which is listed in Amsterdam and owns telecoms networks in France, Portugal and Israel, launched a $2.5bn buy out offer in September. French billionaire Mr Drahi, who already owns almost 78 per cent of the company’s stock, offered €4.11 a share to buy out minority investors which was pitched as a 24 per cent premium to the Altice stock price.
The board recommended the offer yet the take private has attracted the ire of hedge funds holding Altice shares, including Lucerne and now Winterbrook, which are planning to launch court action in Amsterdam.
The funds argue that Mr Drahi has sought to exploit a temporary decline in the value of European telecoms stocks on the back of the Covid-19 pandemic at the expense of minority shareholders with an offer that, according to Winterbrook, “drastically” undervalues the real value of its assets like SFR, the French telecoms company.
Altice told the Financial Times: “There is a clear rationale for the transaction which will enable the company to focus on its long term strategy . . . the transaction values Altice Europe above its peers in the telecom industry.”
The company has defended its valuation in investor meetings by comparing to the performance with direct peers including Orange in France, NOS in Portugal and Bezeq in Israel. It has also highlighted a 2.3 times return on equity since its float in 2014 when factoring in the split of its US business into a separately listed company.
It is not the first time Mr Drahi has become embroiled in a battle with minority shareholders that have objected to a squeeze-out offer. French regulators blocked Altice’s attempt to buy out minorities in SFR in 2016 on the basis that insufficient information had been provided to the investors. The buyout was completed a year later.
Winterbrook, a UK fund which has built an undisclosed stake in Altice Europe, late last week filed in the US District Court for the Southern District, New York via the law firm Boies Schiller Flexner requesting that documents related to the valuation of Altice Europe are revealed.
It has targeted Lazard and LionTree, financial advisers to the Altice Europe offer, as well as Dexter Goei, a key lieutenant of Mr Drahi, who is chief executive of Altice USA, a listed cable business that was split from Altice Europe three years ago. Winterbrook has argued in the legal documents that it is “likely” that Mr Goei engaged in communications regarding the fairness of the buyout offer for Altice Europe.
The use of a US legal process known as a 1782 application is becoming more common among disgruntled shareholders and aggrieved parties in mergers and acquisitions.
Altice Europe’s shares have risen to €4.45 in recent weeks but have lagged a broader recovery in telecoms valuations and are down roughly a quarter since the start of the year.