Warburg Pincus back in the race for Altice Portugal as rival pulls out

The United States fund Warburg Pincus, together with Zeno Partners – a private market asset investor based in Switzerland and the US -, and former Portuguese bank manager António Horta Osório have one less competitor in a bid for telco Altice Portugal since the French telco Iliad has pulled out of the race.

This is according to business daily Negócios, which has spoken to three sources close to the process that say that Iliad, held by the French tycoon Xavier Niel and supported by law firm Vieira de Almeida (VdA), is now no longer interested in undertaking asset valuations on the Portuguese company that owns the brand MEO.

The bid for Altice Portugal, owned by Patrick Drahi, is now a two-horse race between Warburg Pincus and its partners and Saudi Telecom, the latter of which has so far come up with the best offer, an offer that Warburg Pincus said, some months ago, that it was not prepared to better.

With Iliad out of the picture for the binding offers phase, Warburg Pincus will likely return to the negotiating table with Altice with a fresh competitive advantage given the limitations that a sale to Saudi Telecom could bring.

And since the formerly government-owned Portuguese telco – it was called Portugal Telecom when it was a public company – is considered to be critical infrastructure by the government, the new Aliança Democratica (AD) government could bring pressure to bear on a decision in favour of Warburg Pincus.

This is because a law enacted in 2014 gives Portugal the power to evaluate the risk and the impacts that a sale could have on critical infrastructure and strategic assets in terms of security and the defence of fundamental services provision.

Not only that, at an EU level, Brussels allows all Member-States to prevent or overturn a deal over public order and security concerns.

Meanwhile, it is still not clear how much of Altice Portugal, which is the golden goose of the Altice International group, its founder Patrick Drahi intends to sell to meet part of a massive €60Bn black hole in the French holding’s accounts as a result of a round of debt-fulled acquisitions over a 10-year period.

Drahi was hoping to net at least €10Bn for Altice Portugal last year, however current bids said to be on the table stand at around €6Bn.

Meanwhile, in Portugal there is an ongoing Public Ministry investigation into corruption allegations aimed at the group’s operations over rigged procurement activities.

Alexandre Fonseca, the co-CEO of Altice Group who led Altice Portugal from November 2017 to April 2022, left the group in January, although he was not considered a suspect in the investigation. Altice also suspended about 15 employees as a result.

And Bloomberg has reported that French public prosecutors are also looking into potential corruption linked to Altice with police probes across the whole group, including in the US.

Citing sources close to the situation, Bloomberg said French prosecutors are “looking into suspicions of corruption of individuals who don’t hold public office, as well as money laundering and attempts to cover up the offences.”

Armando Pereira, who founded Altice together with Patrick Drahi, was placed under house arrest from July to October 2023 but was released on bail.