Numericable Is Said to Plan SFR Bid Valued at $20 Billion

Numericable SA (NUM) and its shareholder Altice SA (ATC) are preparing an offer valued at about $20 billion to merge with Vivendi SA (VIV) ’s French telecommunications unit SFR, according to a person familiar with the matter.

The bid will include about 11 billion euros ($15.2 billion) in cash, 3 billion euros in Numericable’s cable assets and a 750 million-euro capital increase by Altice, said the person, asking not to be named because the plan is confidential. While a formal offer hasn’t been made, Patrick Drahi, the billionaire who controls Altice and Numericable, has received guarantees from lenders for 8 billion euros of debt, the person said.

Vivendi accepting a sale of SFR would mean the scrapping of a spinoff of France’s second-largest mobile-phone company as it tries to focus on media. SFR has become the subject of a three-way contest among Numericable, Iliad SA (ILD) and Bouygues SA (EN) , all of which are discussing potential offers, people familiar with the situation said last week.

Ian Whittaker, an analyst at Liberum Capital , said in a note that an offer of that size would be “extremely attractive” and top his 12.4 billion-euro valuation for SFR. “It would give Vivendi a considerable amount of cash, which could be used to return cash back to shareholders,” he said.

Vivendi would keep a minority holding in any merged entity, the person said.

Valuation Differences

A representative for Numericable, whose headquarters are in Champs Sur Marne, France, declined to comment. A spokesman for Paris-based Vivendi said the board will decide in due course depending on the bids received.

Numericable fell 0.4 percent to 29.99 euros at 2:31 p.m. in Paris. Vivendi lost 1.1 percent to 20.49 euros. Altice dropped 1.3 percent to 31.10 euros in Amsterdam. Les Echos reported the planned bid earlier today.

Vivendi and Numericable have negotiated on and off over the past year without coming to an agreement on valuation, people familiar with the matter said last week. While talks with Numericable are the most advanced, Iliad and Bouygues are trying to derail those negotiations and overcome regulators’ skepticism about mobile mergers, they said.

Operators across Europe are looking for ways to consolidate as costs rise for high-speed mobile networks and regulators impose rules on revenue sources such as roaming. Telefonica SA (TEF) and Royal KPN NV (KPN) ’s proposal to merge their German phone units received a so-called statement of objections from the European Commission last week, signaling the carriers will have to make concessions to win approval.

Vodafone Deal

A merger of SFR with broadband provider Numericable will keep the number of wireless network operators in France to four. Orange SA (ORA) , Bouygues and Iliad also run mobile networks. Phone companies in France have been eyeing consolidation for more than a year to put an end to a price war brought on by the arrival of Iliad in 2012, though their talks have never made it past the informal first approach.

In 2011, Vivendi bought full control of SFR, paying Vodafone Group Plc about 8 billion euros for its 44 percent stake, valuing the carrier at 18 billion euros at the time.

Keeping jobs as well as investments in network infrastructure will be a priority for regulators in studying any deal, according to people familiar with the matter.

France’s Industry Minister Arnaud Montebourg is open to a possible reduction in the number of mobile carriers as long as competition continues, a person familiar with the government’s thinking has said. That would be a reversal of policy under former president Nicolas Sarkozy , who encouraged Iliad to offer mobile services through its Free brand.

Other government agencies, including the Competition Authority, would also have to sign off, and EU officials could intervene. Due to those obstacles, Vivendi views Numericable, which doesn’t have a mobile arm, as the most realistic partner for SFR, one of the people said.