CPPIB and BC Partners to take Cablevision stake

January 2016 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

The Canada Pension Plan Investment Board (CPPIB) and funds advised by BC Partners, BC European Capital IX, along with a number of co-investors, are teaming up with Altice NV on its proposed $17.7bn acquisition of Cablevision Systems Corporation.

The investment funds will take a 30 percent equity stake in Cablevision for around $1bn, and as a result of the deal Altice’s acquisition of Cablevision is now fully funded. The transaction, which is subject to regulatory and other customary conditions, is expected to close in the first half of 2016.

According to a statement announcing the deal, CPPIB and BC Partners have exercised their option to participate pro rata in the Cablevision acquisition as part of CPPIB and BC Partners’ announced agreement to sell a majority stake in Suddenlink to Altice for $9.1bn in May. The two buyout firms have retained a 30 percent stake in Suddenlink. CPPIB and BC European Capital IX will each fund 12 percent of the acquisition in Cablevision, committing approximately $400m each to the deal, with the outstanding amount funded by co-investors. “This is an attractive opportunity to invest in a sector that we know well,” said Shane Feeney, managing director and head of direct private equity at CPPIB. “We are pleased to further expand our relationship with Altice, a best-in-class cable operator, and BC Partners, a longstanding fund partner.”

“We are delighted to continue to invest in partnership with Altice and CPPIB, and are highly confident in Altice’s ability to further enhance network quality, increase customer satisfaction, and meaningfully improve financial performance at Cablevision,” said Raymond Svider, co-chairman and a managing partner of BC Partners. “(We) are highly confident in Altice’s ability to further enhance network quality, increase customer satisfaction, and meaningfully improve financial performance at Cablevision,” he added.

Altice agreed to acquire Cablevision in September in a deal which will see the European firm pay $10bn in cash, and assume $7.7bn of outstanding Cablevision debt. In October Altice announced that it had secured $8.6bn of funding for the deal in new debt, including a $3.7bn seven year senior secured term loan, $1bn of 10 year senior guaranteed notes and $3.8bn of seven and 10 year senior unsecured notes.

Altice’s deal for Cablevision comes as the European company attempts to build a transatlantic cable giant, having completed a number of deals for television and radio targets in Europe in 2015. Indeed, Altice is Europe’s most acquisitive cable group in recent years, and is moving closer to completing its largest US deal to date. Alitce will join the ranks of major pay-TV providers, as the newly merged company will become the fourth largest cable operator in the US with 4.6 million customers in more than 20 states. Since the company was founded in 1973, Cablevision has become one of the largest cable operators in the US.

Since entering the US market, Altice’s business model has been particularly disruptive. The company offers bundles of cable television, high-speed internet and fixed and mobile-phone services. Altice intends to eventually separate its bundles into individual packages, undercutting the company’s US rivals in the process. The cable television market in the US is in the midst of a revolution as traditional cable operators adapt to a new tranche of entrants into the space. Streaming services such as Netflix, Hulu and Amazon Video are posing a threat to advertisement and subscription revenues, as well as subscriber numbers.

Dexter Goei, the chief executive of Altice, noted: “We are extremely pleased that BC Partners and CPPIB – our future partners in Suddenlink – have also agreed to invest alongside us in Cablevision and to continue to accompany Altice in its long term oriented growth and investment strategy in the US.”

Founded in 1986, today BC Partners has advised funds of over $14bn, and since inception has completed 89 investments with a total enterprise value of nearly €100bn.

Richard Summerfield