Investing alongside a billionaire co-owner can be a smart way to ensure that management stays focused on shareholder interests. Except when the billionaire turns the tables.
Patrick Drahi, the Franco-Israeli controlling shareholder of the Altice cable empire, is trying to take his European company private at an opportunistic valuation. This should serve as a warning to investors in Altice USA , Mr. Drahi’s U.S. company: There is little to stop the same thing happening to them.
Mr. Drahi launched his offer for the shares he doesn’t already own in Altice Europe in September. The price was €4.11—a 23.8% premium to the previous close, a press release noted. But the share price was as high as €6.74 in February. European telecom companies haven’t escaped the Covid-19 crisis, and Altice Europe stock fell farther than most because of its high leverage.
True, the deal’s earnings multiple is ahead of where Europe’s former state telecom monopolies are trading in a deeply depressed sector. More pertinently, though, it is well behind those of transactions done in recent years by Altice Europe’s closest peer: Liberty Global , the European investment vehicle of U.S. cable entrepreneur John Malone, who helped inspire the Altice ventures.
Still, Mr. Drahi owns 77.58% of Altice Europe, giving him substantial sway with its management. Having persuaded them that €4.11 is a fair price, the question is whether he even needs to convince minority shareholders. The Netherlands, where the company is listed, has a famously flexible corporate-governance regime.
