Altice USA, just days after euthanizing its $8.4 billion bid for Canadian telecom company Cogeco, said it would repurchase about $2.5 billion of its shares, a move that boosted its stock by more than 8% in early trading Monday.
Altice USA shares were up about 8.4% ($2.73 each) to $34.99 per share in early trading Nov. 23, primarily because of the buyback plans. Analysts and investors have been looking for Altice USA to increase its share repurchase program after it pulled the plug on its bid to buy Cogeco Communications earlier this month.
Altice USA launched the Cogeco bid, with Canadian telecom giant Rogers Communications, on Sept. 2 for $7.8 billion ($3.4 billion for Cogeco’s U.S. cable company, Atlantic Broadband). After being rejected by Cogeco’s controlling shareholder and increasing its offer in October to $8.4 billion, which was also rejected, Altice USA formally gave up on the pursuit on Nov. 18.
According to a press release, Altice USA said it has commenced a Dutch auction tender offer to repurchase $2.5 billion of its shares, at a price not to exceed $36, nor less than $32.25 each. Altice USA’s share price as of Nov. 20 was $32.27 each. The offer will be open until Dec. 21 and is contingent on the completion of its sale of 49% of its Lightpath telecom unit to Morgan Stanley Infrastructure Partners, which recently received regulatory approval.
Altice USA also raised its share repurchase target for 2020 to $5 billion from $2.5 billion previously. The company said it repurchased about $660 million of its shares between Oct. 1 and Nov. 20, putting its year-to-date buybacks at about $2.5 billion.
In a research note, Bernstein media analyst Peter Supino said the buybacks were expected, but was surprised at the timing and the amount.
“This offer seems to indicate the strength of the underlying business and the public LBO strategy of the company,” Supino wrote. “While we anticipated that the Lightpath deal would potentially result in an increased capital return to shareholders, we did not expect the timing or magnitude of the transaction.”
The offer price of the buyback represents a 12% premium to Altice USA’s closing price on Nov. 20, and will result in a 12.8% to 14.3% reduction of outstanding shares. According to Supino, Altice has bought back about $5 billion of its stock at an average price of $24 each since 2018.
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Mike Farrell is senior content producer, finance for Multichannel News/B+C, covering finance, operations and M&A at cable operators and networks across the industry. He joined Multichannel News in September 1998 and has written about major deals and top players in the business ever since. He also writes the On The Money blog, offering deeper dives into a wide variety of topics including, retransmission consent, regional sports networks,and streaming video. In 2015 he won the Jesse H. Neal Award for Best Profile, an in-depth look at the Syfy Network’s Sharknado franchise and its impact on the industry.