Altice's Cablevision deal encounters surprise regulatory hurdles in New York
Altice NV has encountered unexpected regulatory "turbulence" with New York City regulators in its bid to close its $17.7 billion purchase of Cablevision (NYSE: CVC), The Wall Street Journal reports.
However, Cablevision and Altice are making the case that, because of Cablevision's franchise agreement with the Big Apple, an approval from that jurisdiction isn't necessary.
Regardless, analysts say anxiety is making its way to Wall Street, where Cablevision's stock price -- which had ballooned in the months preceding Altice's September takeover -- is now down 9 percent since the deal was announced.
"The spread has widened in large part because people have become increasingly concerned that neither the city nor the state will find that the transaction is in the public interest, or alternatively, they'll demand so much in terms of givebacks that ultimately the deal won't be palatable to Altice," said MoffettNathanson analyst Craig Moffett to the WSJ.
According to the paper, the New York City officials believe there are a "number of important concerns" with the deal, which involves 3.1 million Cablevision customers situated in the New York market. These regulators believe they have the power to stop the deal.
There is concern that austerity measures announced by Altice -- the Netherlands-based company has said it will trim $900 million from the Bethpage, N.Y.-based MSO's operational budget -- will not jibe with the public interests of New Yorkers.
"Altice is talking about $900 million in synergies. Well, what's getting cut? How's that going to impact the economy of New York and quality of services? We certainly are not afraid to disapprove a transaction," said Maya Wiley, top legal counsel to New York Mayor Bill de Blasio, in an interview with WSJ. (Notable: The mayor's office has had a difficult relationship with Cablevision, often siding with the Communications Workers of America in its labor disputes with the MSO.)
It's questionable how much weight Wiley's threats carry. Altice and Cablevision have filed for approval with the FCC and New York Public Services Commission. But the companies sent a letter to the New York City officials, telling them that Cablevision's franchise agreement with the city exempts it from local regulatory review. (They have filed for approval regarding the MSO's business services division, however).
The Public Services Commission is set to finish its review in April.
"We believe that the transaction will bring clear benefits to New York and Cablevision customers," Cablevision said in a statement. "We are confident that we will secure all remaining, necessary approvals through what we expect will be a fair and open process."
Word of possible trouble for Altice in New York comes as the telecom conglomerate just closed its $9.1 billion acquisition of St. Louis-based Suddenlink Communications.
On Tuesday, Suddenlink announced the management team behind its new U.S.-based operational unit. Altice CEO Dexter Goei will assume the chairman position for the newly christened Altice USA.
Former Morgan Stanley investment banker Charles F. Stewart and former Altice Dominican Republic chief Hakim Boubazine will serve as co-presidents of the U.S. operation, with Stewart also serving as CFO and Boubazine doing double duty as COO.
Altice NV COO Michel Combes will oversee the integration of the U.S. operation with the rest of the company's global telecom business.
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