(Bloomberg) — Charter Communications Inc. is exploring a takeover of smaller cable provider Altice USA Inc., according to people with knowledge of the matter.
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Altice USA’s stock soared on the news, gaining as much as 63% for the biggest jump since its spinoff of in 2018. Shares of Altice USA, which has more than $25 billion in debt, closed up 36% to $2.49 Monday in New York, giving the company a market value of about $1.14 billion.
Charter is working with financial advisers as it studies the merits of a potential deal for the US broadband and video services provider, the people said, asking not to be identified discussing confidential information.
It’s unclear whether a formal approach has been made and Charter could decide not to pursue a transaction, the people said.
Representatives for Charter and Altice USA declined to comment.
Altice USA, spun out of Europe’s Altice NV in 2018, is one of the largest broadband and video services providers in the US, serving almost 5 million residential and business customers across 21 states, according to its website.
Charter has been losing broadband customers amid an onslaught by wireless providers. Charter and other cable providers are struggling as customers flee traditional TV packages and head toward streaming fare, and mobile phone providers mount stiff competition with wireless broadband offerings.
Share Plunge
Charter’s shares also have taken a beating and are now down 22% in the past year. Its shares sunk as much as 3.8% Monday before closing down 2.3% to $292.64, giving it a market value of about $50 billion.
Shares of Altice USA had plunged 53% in the past year before Monday. Even with Monday’s gains, the stock is worth less than 7% of what it was valued at in 2020 at its peak.
Charter’s deliberations come as billionaire Patrick Drahi has made clear that every part of his Altice empire — the telecommunications and media giant he cobbled together over 30 years — is up for sale. Rising interest rates and financing costs have challenged his business model, which is built on debt-fueled acquisitions that put his group among Europe’s most leveraged companies.
Read More: Billionaire Drahi Cornered by Debt Mountain, Corruption Scandal
To make matters worse, Altice is the target of a corruption probe in Portugal involving Drahi’s innermost circle. Altice USA’s own chief procurement officer, Yossi Benchetrit, was fired in August after he refused to engage with the company’s investigation into the corruption allegations. The company said in November that its internal probe was “substantially complete” and wasn’t expected to have a material financial impact on the US business.
–With assistance from Todd Shields.
(Updates with closing share price in second paragraph.)
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