In a strategic move to alleviate its massive debt burden, Altice France has announced the sale of a 70% stake in its data center business. The transaction, valued at €535 million ($586 million), is set to pave the way for a new company called UltraEdge, which will be controlled by Morgan Stanley Infrastructure Partners. This article delves into the details of the deal, the implications for Altice France, and the impact on its telecom empire.
Altice France enters into a lucrative deal
Altice France has agreed to sell a significant portion of its data center business in a landmark deal worth €535 million. This move comes as part of Altice’s broader strategy to reduce its staggering $60 billion debt accumulated by the group. The sale, consisting of a 70% stake, is expected to address the financial concerns surrounding the company.
Morgan Stanley Infrastructure Partners Takes Control
The newly formed entity, UltraEdge, will be under the ownership and management of Morgan Stanley Infrastructure Partners. With its extensive expertise and resources, Altice France anticipates a seamless transition and the capability to optimize the performance of the data center business.
Assets included in the deal
The assets included in this transaction are 257 data centers and associated office space, which were previously under the control of Altice’s carrier SFR. By divesting these assets, Altice France is streamlining its operations and focusing on core areas where it holds a competitive advantage.
Positive market response signals investor confidence
News of the deal has had a positive impact on the market perception of Altice France. Following the reports, bonds issued by Altice France SA experienced an increase in value, indicating a vote of confidence from investors. This surge in investor optimism bodes well for Altice France as it seeks to strengthen its financial standing.
Actual asset sale alleviates concerns
The sale of Altice France’s data center business marks a significant step forward in addressing market concerns surrounding the company’s ability to deliver on rumored sale prices. By executing an actual asset sale, Altice France provides clear evidence of its commitment to debt reduction and financial stability.
Debt reduction strategy
The sale of the data center business is in line with the broader debt reduction strategy adopted by Altice France. With the telecom empire built by its founder, Patrick Drahi, burdened with significant debt, the company has been actively divesting non-core assets to ensure a healthier balance sheet.
Corruption Probe Adds to Challenges
Altice France is currently facing a corruption probe in Portugal, which specifically targets high-ranking executives and confidants of Patrick Drahi. While the sale of the data center business is a positive development, the ongoing investigation adds further complexity to Altice France’s operations and reputation management.
Valuation and Financial Impact
The deal places UltraEdge’s valuation at €764 million when accounting for the included debt. This valuation serves as a benchmark for Altice France as it continues to assess and restructure its portfolio to address its significant debt burden.
Timeline and Closure Expectations
The transaction is expected to conclude in the first half of the coming year, providing ample time for relevant approvals and regulatory processes. This timeline underscores Altice France’s commitment to streamlining operations expediently while ensuring regulatory compliance.
The Build-to-Suit Arrangement
An additional component of the agreement is a “build-to-suit” arrangement between UltraEdge and SFR. This arrangement is projected to generate approximately €175 million over the next seven years, bolstering SFR’s financial position and ensuring ongoing support for UltraEdge’s operations.
Altice France’s decision to sell a 70% stake in its data center business for €535 million marks a pivotal shift in its strategy to reduce debt and regain financial stability. The sale to Morgan Stanley Infrastructure Partners, through the formation of UltraEdge, demonstrates the company’s commitment to deleveraging its telecom empire. While facing a corruption probe and navigating a challenging market environment, Altice France is taking decisive steps to reshape its portfolio and restore investor confidence.