Yahoo Finance Billionaire Drahi Tightens Grip on BT, Building Stake to 25%
(Bloomberg) -- Billionaire Patrick Drahi increased his stake in BT Group Plc to 24.5%, giving him double the holding of the next-biggest investor and increasing his control over the UK telecommunications giant.
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Altice UK doesn’t intend to make an offer for all of BT, Drahi’s investment vehicle said in a statement on Tuesday, which begins a six-month commitment under UK takeover rules. Drahi added 650 million shares, which is worth about £962 million ($1.2 billion) at the average share price over the last three months and ups his holding from 18%.
Read More: Billionaire Drahi’s Altice Sees BT Group as ‘Undervalued’
While Drahi has never spoken publicly about his long-term intentions with BT, he has a record of taking what he sees as undervalued telecom companies private or carving out assets for sale. Drahi has been gradually increasing his stake since first announcing an investment in June 2021, each time making a statement in support of the company’s management.
A spokesman for Altice UK said that the company remains “supportive” of BT’s management and doesn’t plan to seek a seat on the board.
BT shares were little changed at 148 pence at 10:42 a.m. in London trading. The stock has gained about 32% this year.
Still, Drahi may just be interested in influence over the telecom carrier or a financial investment in what one of his financial advisers called an “undervalued” asset in January, Berenberg analyst Carl Murdock-Smith said in a note on Tuesday. Buying the whole company or splitting off BT’s nationwide Openreach network may be “impossible” or almost impossible. That’s because of the political ramifications of a foreign investor interfering in what was once the UK’s telecom monopoly, and the need to finance BT’s very large pension obligations, he said in an emailed note.
What Bloomberg Intelligence Says:
Patrick Drahi-controlled Altice’s increased BT Group stake (24.5% from 18%) shines fresh light on the widening gap between public and private market valuations for Europe’s largest telecom carriers. The move looks opportunistic given BT’s recent share-price slump and Drahi, with no stated take-private plans, appears to be playing a long game predicated on public markets eventually placing a higher multiple on BT’s cash flow, regardless of whether it more than doubles by the end of the decade as management targets.
— Matthew Bloxham, BI media and telecoms analyst
Read More: BT Says UK Won’t Take Action on Drahi’s Stakebuilding
While BT’s share price has lost more than a quarter of its value in the last five years, it would still be a hefty acquisition, with a current market capitalization of about £14.6 billion and net debt of £18.9 billion as of March. Drahi has also faced challenges to his empire-building amid tighter debt markets in the last year.
BT’s Chief Executive Officer Philip Jansen previously said Drahi is supportive of the company’s strategy and recognized “the industry structure could be improved.” Last week, the company announced plans to cut as many as 55,000 jobs by the end of the decade to reduce costs.
Read More: Billionaire Drahi Faces an Unfamiliar Test of Empire Building
BT’s rival, Vodafone Group Plc, has also seen its top ranks of shareholders taken over by strategic investors, including Drahi’s peer, French telecom tycoon Xavier Niel, as well as United Arab Emirates-backed carrier Emirates Telecommunications Group Co. and cable group Liberty Global Plc.
--With assistance from Benoit Berthelot.
(Updates with analyst commentary in sixth paragraph)
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