Wednesday, January 10, 2018

Tele2 acquires Com Hem: target 'untapped customer demand'

Merger announcement & presentation:
  • Acquires Com Hem
    • HH coverage 60%, 1100 employees
    • Results TTM: rev SEK 7.1b, adj EBITDA SEK 2.9b, OFC SEK 1.8b)
    • Merger, Tele2 absorbs Com Hem.
    • Cash (per share: SEK 37.02 SEK) + stock (per share: 1.0374 B-shares) = SEK 6.6b + 26.9% of Enlarged Tele2 = 146 SEK/share (11.8% premium over 180109 closing price, 15.9% premium over -30 trading days)
    • To issue 184.8m new B-shares, total 687.6m shares (o/w 22.8m A, 664.8m B); Kinnevik (to own 27.3% & 41.9% of votes) supports (lock-up 6 mo after completion).
    • To close 18H2 (latest 190331).
    • Refers to EC, prepared to effect pro-competitive measures if required to complete the merger.
  • Total synergies
    • 50/50 from costs (mostly opex) & rev (complementary, cross-selling)
    • Total 900m SEK/annum in yr 5 (65% in yr 3, 80% in yr 4)
    • Integration costs SEK 600m
    • Rentention bonus 12-24 mo base salary for mgt & key employees
    • Accreditive to FCF from yr 1.
  • Management
    • Anders Nilsson (Com Hem) to replace Allison Kirkby as CEO.
    • New Board to be chaired by Georgi Ganev (Tele2), >= 2 Com Hem members (incl Andrew Barron).
  • Targets
    • Increase shareholder remuneration.
    • Target leverage remains 2.0-2.5 (at closing net debt/EBITDA TTM 2.8).
  • Rationale
    • Untapped customer demand
    • Value accreditive
    • Complementary, complete proposition to improve customer satisfaction & loyalty
    • Greater scale & diversification
    • Unlock synergies
    • Revenue & CF diversification
  • 2017
    • Dividend 2017E: 4 SEK/share for Tele2, 6 SEK/share for Com Hem.
    • Combined results TTM: rev SEK 31.8b, adj EBITDA SEK 9.2b, OCF SEK 6.1b.
    • Sweden 72% of revenues & 78% of EBITDA (TTM).
    • Market shares in Sweden pro forma: 28% mobile, 22% FBB, 39% DTV.

Tuesday, January 09, 2018

Altice strategy update: USA spin-off, Europe disposals, both deleveraging

  • To spin-off Altice USA (incl Altice Technical Services US; 67.2%; excl Netune stake) by end 18Q2; 0.4163 Altice USA shares (A (1 vote) or B (25 votes)) for 1 Altice share, CEO Dexter Goei. Altice USA free float from 10.3 to max 42.4% (voting from 0.6 to 47.2%), Next to hold 51.2% of votes.
  • Altice Europe to reorg into France (incl FOT; bought from Int for EUR 550m o/w 300m cash), International (Meo, HOT, DomRep, Teads), Pay TV (content, sports rights, other premium content: Discovery, NBCU), Dennis Okhuijsen CEO
  • Separate mgt teams, Patrick Drahi control of both (President Europe, Chairman USA) via Next.
  • Altice USA plans $1.5b cash dividend prior to spin-off from Optimum facilities o/w EUR 900m for Altice Europe (o/w 625m for debt, to retain 275m).
  • Altice USA plans $2b SBB after spin-off.
  • Altice Europe strategy: turnaround in FR, PT; optimising performance, invest in infra, monetising content (various pay TV models & ads); non-core asset disposals (towers; DomRep; Switzerland; int wholesale voice to be sold).
  • Altice France 17Q4prel: revenue declines in B2B, wholesale, equipment, FY 2017 rev -2%, target opFCF 2018 EUR 1.6-1.7b (incl 300m pay TV content expenses & 200m drag from French VAT changes); Altice Europe net debt pro forma at 170930 EUR 31.0b (5.4x EBITDA TTM), targets 4x leverage.
  • Altice USA strategy: investments in networks & video product, simplification, improved customer service, improve rev growth, complete opex synergies, Altice One (platform), FTTH & MVNO (on Sprint) completion.
  • Altice USA 17Q3 pro forma incl planned div: net debt $22.7b, leverage 5.8x EBITDA TTM, target leverage 4.5-5.0x (reduced from 5.0-5.5).