Altice USA spin out makes a lot of sense
Altice USA has undoubtedly been hit by the weak performance of parent Altice NV with investors concerned that the European balance sheet weakness will affect the US. Formally separating the two resolves this issue as well as significantly expanding ATUS's free float from 10% to 42% of shares out. Altice USA leverage targets were also reduced even while the company announced a incremental $3.5bn return to shareholders, meaning leverage will go the wrong way in the near term. Interest deductibility still looks set to be an issue in 2022 (re the 30% of EBIT test) but, net net, the transaction looks to be a very positive development. We remain Overweight and would note that ATUS's 20%/44% discount to CMCSA/CHTR's fully taxed 2019 FCFPS looks quite attractive especially as issues ease.Altice USA is a holding company. Through its subsidiaries, the company provides broadband communications and video services and markets its services primarily under two brands: Optimum, in the New York metropolitan area, and Suddenlink, principally in markets in the south-central United States. The company delivers broadband, video, and telephony services to the residential and business customers. The company also provides fiber connectivity, bandwidth and managed services to enterprise customers through its Lightpath business (also marketed as Altice Business) and the company provides advertising time and services to advertisers. The company has launched Altice Mobile, a mobile offering, to consumers across its footprint.
Formed in 2003 by an established team from Cazenove, one of the most respected investment banks in the UK, Atlantic Equities conducts and publishes fundamental, bottom up research on mid and large cap US companies.
Atlantic provide order execution through a wide range of DMA products and algorithmic trading suites.
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