Altice NV Chairman-CEO Patrick Drahi is reorganizing his cable empire with plans to split the company into separate entities for the U.S. and Europe.
The Altice USA division will be spun off from Altice NV. The remaining company will be renamed Altice Europe. Drahi will retain his tight control of both entities, serving as chairman of Altice Europe and president of the board for Altice USA. Altice said it expects the reorganization to close by the second quarter after securing shareholder and regulatory approval.
“The separation will allow both Altice Europe and Altice USA to focus on their respective operations and execute against their strategies, deliver value for shareholders, and realize their full potential,” Drahi said. “Both operations will have the fundamental Altice model at their heart through my close personal involvement as well as that of the historic founding team.
The goal is to streamline the operations of both companies, making their operations more transparent and attractive to investors. Altice has been grappling with a heavy debt load that is more than five times earnings. As part of the split, Altice USA will pay a $1.5 billion dividend to Altice Europe, helping the latter company pay down existing debt.
With the separation, Dennis Okhuijsen will focus on Altice Europe, and Altice USA CEO Dexter Goei will focus exclusively on running the cable systems acquired in 2015 and 2016 from Cablevision and Suddenlink. Altice USA is the nation’s fourth-largest cable operator. But the consolidation of its earnings with Altice NV’s cable, pay TV and telecom businesses in France and other parts of Europe made the company harder for U.S. investors to understand.
Altice USA’s debt load will top $22 billion after the dividend is paid. Goei told investors in a conference call Monday that the company recognizes that its debt-to-earnings ratio is higher than its peers and the company is aiming to pare it down to 4.5 to 5 times earnings. Goei said there are no near-term plans for Altice USA to pursue acquisitions.
Altice USA is in the midst of a carriage battle with the Starz-Encore pay-TV group. Starz’s 17 channels went dark on Altice systems Jan. 1 when the sides could not come to terms on a new deal. Altice has vowed to take a hard line on programming costs in an effort to deliver some $900 million in annual savings from the Cablevision systems, which comprise the bulk of Altice USA.