Billionaire Patrick Drahi’s Altice (ATC) SA won the bidding contest for Vivendi SA (VIV)’s French phone unit, beating a government-backed offer from Bouygues SA (EN) by agreeing to a deal valued at more than 17 billion euros ($23 billion).

Altice will pay 13.5 billion euros in cash and give Vivendi 20 percent of the company created from a merger of its Numericable Group with Vivendi’s SFR. Vivendi will receive an extra 750 million euros if earnings targets are met, the companies said in separate releases.

The deal gives Altice’s cable carrier Numericable wireless services that allow it to challenge market leader Orange SA (ORA) and Bouygues’s phone unit by offering bundled mobile, landline, TV and Internet packages. By sticking to its preferred bidder after three weeks of exclusive talks, Paris-based Vivendi is seeking to end a bidding war that has threatened to delay its reorganization to focus on media.

“It changes the dynamics a bit -- you’ve now got four credible quad-play offers in the market,” said Ian Whittaker, an analyst at Liberum Capital Ltd. in London. “From a Vivendi standpoint -- they are now getting out of SFR which is a plus.”

Scrapping an initial plan to spin off SFR, France’s second-largest phone company, Vivendi said the agreement with Luxembourg-based Altice faces fewer regulatory obstacles and that it will eventually sell the residual stake.

Bouygues Offer

“After thorough discussions, the supervisory board decided unanimously to select the Altice/Numericable offer which corresponds to the industrial project offering the highest growth potential, generating the highest value for its customers, employees and shareholders, while best meeting Vivendi’s objectives,” Vivendi said in its statement.

In a release, the construction and media conglomerate led by Martin Bouygues acknowledged Vivendi’s decision, saying it had improved its bid again on April 5, offering 15.5 billion euros in cash and a 5 percent stake of an entity from combining SFR with Bouygues Telecom.

While Industry Minister Arnaud Montebourg openly supported Bouygues, Vivendi said it had asked any buyer to stick to employment promises “that correspond to the priorities defined by the French government.” SFR employs about 9,000 people.

Altice has taken on “formal engagements to guarantee employment in the framework of this merger,” Drahi said in a statement. “This project will generate strong growth, which will create jobs and investment.”

Capital Increase

Altice and Numericable said they will help finance the deal by raising 4.7 billion euros of capital and with 8.8 billion euros of debt. Buyout firms Cinven Group Ltd. and Carlyle Group LP ( CG:US ) agreed to sell a 35 percent stake in Numericable to Altice for an undisclosed price, Altice said.

Vivendi chose Altice after it put up an additional 1.75 billion euros in cash. Under the agreement, the combined group will be 60 percent owned by Altice and 20 percent will be publicly traded, with 11.6 billion euros in debt. Vivendi can’t start selling its 20 percent stake for one year, and must give Altice a first chance to buy it.

For Drahi, the 50-year-old Altice chairman who made his fortune amassing cable assets, the transaction cements years of seeking to take over SFR, whose previous owners included Vodafone Group Plc. His business empire stretches from Israel to Portugal to the Caribbean, and he saw through an initial public offering of Numericable in Paris in 2013 and Altice on the Amsterdam exchange this year. He will be the chairman of the combined SFR-Numericable.

Bloomberg News reported on Jan. 20 that Vivendi was considering a sale of SFR to Numericable and Altice.

Antitrust Review

Combining Numericable’s 1.7 million broadband users with SFR’s 21 million mobile-phone customers is less likely to lead to an extended antitrust review than Bouygues’s proposal because it involves a merger of landline with wireless assets, people familiar with the matter have said. The merger will also keep the number of mobile-network operators in France to four.

Altice will pay Vivendi the extra 750 million euros if the enlarged unit’s earnings before interest, taxes, depreciation and amortization minus capital investments amounts to more than 2 billion euros in any given year.

If the deal is completed, it could surpass Actavis Inc.’s agreement to buy Forest Laboratories Inc. by value, according to data compiled by Bloomberg. Comcast Corp.’s bid for Time Warner Cable Inc. is the largest deal announced this year. Holcim Ltd. and Lafarge SA, the world’s two biggest cement makers, said April 4 they are in merger talks to create a company with $40 billion in revenue.

The SFR transaction could also provide one of the biggest financing deals to loan bankers in Europe this year.