Altice to Spin Off U.S. Unit

Altice NV will spin off its U.S. unit, letting billionaire Patrick Drahi maintain control of both companies while he pursues a turnaround plan for the debt-laden European operation.

Altice’s 67 percent stake in Altice USA Inc. will be distributed to shareholders by the end of the second quarter, the companies said Monday in a statement. Drahi’s holding company will have at least 51 percent of the voting power of the U.S. company after the transaction.

The split lets Altice USA continue on its expansion path unfettered by its parent company’s struggles in Europe, where Drahi is seeking to appease investors worried about debt that tops $50 billion. The billionaire has indicated he’d like to participate in consolidation in the U.S. pay-TV market and perhaps enter the wireless business there.

“This is an important moment for the group to focus on existing operations,” Altice USA Chief Executive Officer Dexter Goei said on a conference call. “Over time we suspect that the clarity and simplicity of the structure will help our investor base be supportive of things going forward. The DNA of the group is to try and grow strategically over time.”

In August, Altice considered seeking funding to make a bid for Charter Communications Inc., the second-largest U.S. cable company. The American unit of Drahi’s company has $21.2 billion in debt, mostly from the acquisitions of Cablevision Systems and Suddenlink Communications in 2015 and 2016.

Shares of Altice USA have dropped 30 percent since the division’s initial public offering in June. They rose 1.9 percent to $21.50 in late trading Monday.

In Europe, Drahi has made management changes, put a stop to acquisitions, and committed to selling assets and bringing down leverage in the European business to four times earnings before interest, taxes, depreciation and amortization, or Ebitda, from about 5.1 times.

The parent company cut its full-year profit forecast in November, citing slower than expected progress at reducing costs at its French phone and cable businesses.

Altice USA will pay a $1.5 billion dividend before the spinoff, meaning the parent company gets a $1 billion parting gift. Altice NV will use 675 million euros ($808 million) of the cash to prepay a credit facility, ending up with net debt of about 31 billion euros. The American unit will fund the dividend with its $500 million credit facility and other debt.