Patrick Drahi is about to take American investors for a ride. Unfortunately, some won’t survive the journey.

“The only merit of American cars is that we can carry corpses in the trunk without having to fold their legs,” wrote French crime novelist Frédéric Dard, as noted in a piece in Les Echoes. Ironically, the French newspaper notes, the transport of “stiffs” is perfectly legal on Wall Street, where the art of the deal is often more important than its outcome for investors that take a bath.

This time, Mr. Drahi is taking advantage of Wall Street’s ability to Think Big with other people’s money. The newspaper notes he is not loading the trunk more than average, at least for the United States. “From Twitter to Snap, investors are used to swallowing the ‘private equity’ snakes as long as it delivers an outstanding success like Facebook from time to time.”

While Europe looks on with astonishment at the audacity of Mr. Drahi’s big splash in the States, the newspaper notes American investors don’t seem to notice Mr. Drahi has popped his trunk open on them even as he showers current shareholders with $1.28 billion in dividend payouts as the company constantly attempts to refinance its enormous debts. Altice’s two biggest financial allies, a Canadian employee retirement fund and BC Partners, seem more than happy unloading half their stake in Altice USA during the recent IPO, transferring their exposure to Drahi’s wily ways to someone else.

In the ultimate example of “heads I win, tails you lose” business practices, Drahi has well insulated himself from his own investors and from any consequences for his future mistakes. Les Echoes notes that as part of the complex backing away of Drahi’s North American partners, 98.5% of the voting rights will be conferred not to the buyers, but to Altice itself. Altice will also collect a breathtaking $30 million in fees from the unload. Not to be outdone, Altice’s top three executives are also constructing an elaborate protective cocoon for themselves. In the event of any damage control that changes Altice’s control of ownership, the three get more than $70 million in bonuses.

The newspaper later wrote Altice’s IPO was the latest example of the complacency of the U.S. stock market.

“Altice does not hide its vocation of feeding the great appetite for concentration of cable in the United States,” the newspaper wrote. “The telecoms tycoon passed the final test of entry into the temple of stock market temples.”

While Drahi promises great upgrades that will require considerable investment, his actual record of spending is more mixed than his ambitious statements would otherwise suggest. Upgrades at his acquisition SFR-Numericable languished for years as the company’s attention was more focused on making additional acquisitions, usually with borrowed cash. More than one million customers left while waiting for upgrades, even as service continued to deteriorate.

Back in France, some shareholders are pushing back over what they feel is Drahi’s personal conflict of interest, which may make him very rich off their money.

Last week, activist fund CIMA, a minority shareholder of Altice’s SFR wireless company, filed a complaint with the Tribunal de Grande Instance (TGI) in Paris, noted Le Figaro.

Altice Name Change Will Personally Profit Drahi

CIMA claimed that by 2018, all of Drahi’s acquisitions will be consolidated under the Altice brand. Oddly, Drahi is willing to toss away the SFR brand, which is widely recognized in France and worth an estimated €904 million, and replace it with Altice — a name hardly known inside or outside of France.

“Altice has no commercial recognition,” says Catherine Berjal, co-founder of CIMA.

But then that misses the fact Altice’s trademark is held personally by Drahi and he won’t be offering it for free. Every company owned by Altice will be required to pay unspecified annual royalties to Mr. Drahi starting three years from now, just to license the use of the Altice name.

Making Someone Else Pay Your Fine

When Altice was caught violating French competition regulations, it was fined €80 million by France’s Competition Authority. SFR shareholders were unpleasantly surprised to discover SFR alone covered the fine, despite the ruling which found Altice and SFR equally liable.

Drahi the Landlord

SFR headquarters, Saint-Denis

Finally, some shareholders are scrutinizing SFR’s sudden decision to relocate its corporate headquarters, despite signing a 12-year lease in 2013 for brand new offices in Saint-Denis, priced at €490 per square meter. Berjal notes this sudden move doesn’t make any business sense, until one digs a little deeper.

“Patrick Drahi has decided to break this lease to move SFR into a building that belongs to him personally,” Berjal said, adding the move will result in a spectacular rent increase. “The rent is €725 per square meter [at Drahi’s property], not to mention the contract termination fees that have to be paid [to the old landlord].”

CIMA feels Drahi isn’t exactly representing the best interests of shareholders, just himself.

“The operations mentioned in this complaint were perfectly legal and in compliance with the applicable rules of governance,” countered a spokesman for SFR contacted by AFP.

Drahi’s Ultimate Compensation Package: $43 Billion+

The Wall Street Journal has been tracking Drahi’s dreams of being one of the world’s most richly compensated CEOs, perhaps the richest ever.

Even the most casual investor couldn’t turn a blind eye to Drahi’s original plan for personal compensation, which would have given him $817 million in compensation over five years simply by paying him a management fee of 0.2% of revenues plus a performance fee of 5% of increased cash flows, which was child’s play to accomplish with additional acquisitions or rate hikes. One minority shareholder balked, complaining this kind of compensation was “too easy to achieve.”

Plan “B” could redefine CEO greed for years to come. In addition, to Drahi’s outstanding stock options, worth €55 million at the current stock price, Drahi would keep his 59% ownership of Altice, a stake currently worth €19 billion today. If Drahi manages to triple the share price, his net worth automatically increases another $43 billion dollars. But Drahi is also asking for a bonus: another 30 million shares of Altice stock to be awarded to him automatically. The first 10 million shares automatically are his if he is still alive and breathing at Altice in 2020. Another 10 million shares show up if the share prices doubles by then, and yet another 10 million go into his portfolio if the share price triples by the end of 2021. That represents another €1.1 billion on top of the $43 billion.

That may be why some in the French press have dubbed Drahi the “Big, Bad Wolf.” Les Echoes notes Wall Street has never particularly minded this kind of wolf, as long as it confined itself to eating consumers. But Drahi’s desire to also drain his investors is what the newspaper cautions is a “big bad wolf none would have expected.”

In one of the largest media consolidation acquisitions in history, Sinclair Broadcast Group has agreed to buy Tribune Media and its 42 TV stations in a $3.9 billion deal.

The transaction, expected to win easy approval by the Republican-dominated Federal Communications Commission, will virtually guarantee cable and satellite TV subscribers will pay significantly higher prices to watch Sinclair’s local television stations covering more than 70% of the United States.

Sinclair helped lay the foundation for winning approval of the transaction in GOP-dominated D.C. by hiring former Trump spokesman Boris Epshteyn as Sinclair’s chief political analyst, and Sinclair executives mandate that many of its owned stations air pro-Trump conservative political content labeled as “news stories” as part of local newscasts.

Sinclair’s conservative leanings and accusations of hypocrisy are nothing new for the station group, which has been mired in controversy for more than two decades. The “family values” image that Sinclair purports to have in its political commentaries and corporate image ran headlong into the 1996 arrest of its former CEO David Smith, who used the company Mercedes to pick up hookers in Baltimore. He was convicted of a misdemeanor sex offense. Smith cut a deal with a Maryland state’s attorney that would allow him to avoid picking up trash on the highway or cleaning community-owned pools by having his reporters air stories about Baltimore’s drug court instead.

LuAnne Canipe, a reporter who worked on air at Sinclair’s flagship station, WBFF in Baltimore, from 1994 to 1998, told Salon in 2004 she took a phone call one day about the disposition of Smith’s arrest.

“A Baltimore judge called me up,” she recalls. “He wasn’t handling the case, but he called to tell me about the arrangement and asked me if I knew about it. The judge was outraged. He said, ‘How can employees do community service for their boss?’”

To this day, Smith remains the chairman of Sinclair Broadcast Group, although he relinquished the CEO position last fall.

Canipe said the sexual shenanigans at Sinclair didn’t stop with the CEO either.

“Let’s just say the arrest of the CEO was part of a sexual atmosphere that trickled down to different levels in the company,” Canipe remembered. “There was an improper work environment. I think that because of what he did there was a feeling that everything was fair game.”

Before leaving Sinclair in 1998, she said she once complained to management about another Sinclair employee, who had engaged in audible phone sex inside a station conference room, but that no action was taken against the employee. Canipe passed away in 2016 after battling cancer.

Sinclair stations were required to air political commentary during local newscasts that favored the Bush Administration.

By 2004, the majority of Sinclair’s then-62 stations were living with corporate interference in the local newsroom. Sinclair mandates that most of their owned stations air corporate-produced political segments that are routinely called “to the [political] right of Fox News” by detractors. That year, many local newsrooms at Sinclair stations bristled over the mandatory airing of a daily televised commentary called The Point, hosted by Mark Hyman, then Sinclair’s vice president for corporate relations. The Point could be compared as Sean Hannity’s talking points delivered with the bombastic panache of Bill O’Reilly. As the 2004 election neared, Hyman’s push for George W. Bush’s re-election went into overdrive. Hyman was a fierce advocate for the Bush Administration’s intervention in Iraq and referred to the French critics of President Bush’s war strategy as “cheese-eating surrender monkeys.”

While Hyman force-fed conservative political commentaries to Sinclair stations, he did not extend that same right to others, banning Sinclair’s ABC-affiliated stations from airing an edition of Nightline that showed host Ted Koppel reading the names of U.S. troops killed in Iraq, claiming the idea was inappropriate and “motivated by a political agenda.” Concerns about political agendas were short-lived, however, because Hyman later mandated that 40 of Sinclair’s 62 stations air “Stolen Honor,” a much-criticized and highly controversial political documentary attacking Democratic presidential candidate Sen. John Kerry’s war record. The stations aired a revised version of the documentary days before the 2004 presidential election.

When management at some of Sinclair’s local stations balked at the required airing, Hyman accused them of “acting like Holocaust deniers.”

Just prior to the 2012 election, WSYX was forced to air a Sinclair-produced “special” pre-empting ABC’s 6:30pm national news and Nightline that heavily criticized President Obama, then up for re-election, and accused him of lying about the attack on the American consulate in Benghazi, Libya. The special also pre-empted programming on other Sinclair stations, including WPEC in West Palm Beach.

The implied quid pro quo with the Bush Administration was particularly important for Sinclair as it continued acquiring TV stations, a process that required the approval of the then-Republican controlled FCC. A 2004 Salon article quoted journalist Paul Alexander, who produced a widely acclaimed documentary about Kerry as “insulting to the news-gathering process. That’s not how you gather news; that’s how you blackmail people.”

But news gathering was never the point, according to former Sinclair reporter Canipe. “David Smith doesn’t care about journalism,” she said.

Smith doubled-down on his cozy relationship with the Bush Administration by allowing conservative commentator Armstrong Williams to produce unfettered extended media segments for Sinclair stations. What Smith claims he did not know was that Williams accepted a $240,000 payoff from Bush officials to promote the Administration’s education agenda in the media. Williams brazenly interviewed then Education Secretary Rod Paige, the same man who authorized Williams’ payoff.

The result of the interview, according to the 2005 Rolling Stone piece:

Even before the payoffs became public, the news staff at Sinclair was horrified. The producer who edited the interview Williams did with Paige calls it “the worst piece of TV I’ve ever been associated with. You’ve seen softballs from Larry King? Well, this was softer. I told my boss it didn’t even deserve to be broadcast, but they kept pushing me to put more of it on tape. In retrospect, it was so clearly propaganda.”

When things became politically difficult for the president during the second term of the Bush Administration, Sinclair again came to the rescue, forcing its stations to air headquarter-produced news stories highlighting “good news” about the war in Iraq. Sinclair executives also demanded each of its 62 stations air a pledge of support for President Bush.

Rolling Stone:

But within the company, current and former employees have long known that there is a fine line between ideology and coercion. Jon Leiberman, once Sinclair’s Washington bureau chief, says Smith and other executives were intent on airing “propaganda meant to sway the election.” An ex-producer says he was ordered not to report “any bad news out of Iraq — no dead servicemen, no reports on how much we’re spending, nothing.” And a producer Sinclair sent to Iraq to report on the war calls the resulting coverage “pro-Bush.”

“You weren’t reporting news,” says the producer, who spoke on the condition of anonymity. “You were reporting a political agenda that came down to you from the top of the food chain.”

At the time, Smith told visitors to his Baltimore headquarters: “There are two companies doing truly balanced news today: Sinclair and Fox.”

During the most recent election cycle, Sinclair executives made sure audiences knew where they stood, urging voters to reject Hillary Clinton, as the New York Times reported, “because the Democratic Party was historically pro-slavery.”

More recently, Sinclair has defended the Trump Administration, with orders from Sinclair HQ to stations to dig up information about an online ad that seemed to recruit paid protesters for President Trump’s inauguration in January. Various right-wing groups used the ad as evidence of organized efforts to harass the incoming administration. The ad was later determined to be a hoax, wasting reporters’ time.

The national map of Sinclair and Tribune Media’s reach. (Image: New York Times)

The interference in local newsgathering by Sinclair executives has become so pervasive, its station in Seattle – KOMO, has been rebelling by burying mandated stories surrounding commercial breaks, when viewers are most likely to tune them out. But there is little else the station can do, and like with other acquisitions Sinclair has completed, there are fewer news staffers at KOMO to protest. Standard procedure at Sinclair after an acquisition to is dramatically cut back on employees and offer more stories and content produced at Sinclair’s headquarters or at other Sinclair-owned stations.

Sinclair’s latest target — Tribune Media, owns stations familiar to most cable and satellite subscribers around the country. Among the stations in Tribune’s portfolio — WPIX-New York, WPHL-Philadelphia, WGN-TV/WGN America-Chicago, KDVR/KWGN-Denver, and KTLA-Los Angeles.

“It’s an incredible amount of power in one company’s hands,” said Craig Aaron, president of Free Press.

Tribune Media owns some of the largest local TV stations in the country.

Former FCC commissioner Michael Copps doesn’t much like the deal either, noting it is “another blow to the diversity of journalism that we should have. It’s symptomatic of what is happening in this market, which is fewer and fewer organizations controlling more and more of the information on which our democracy rests.”

Copps

With all the recent turmoil at Fox News Channel, including the cancellation of Bill O’Reilly’s show, Sinclair could use its Tribune Media acquisition to launch a new conservative national news and opinion network that could rival Fox. WGN America, which no longer has anything to do with WGN-TV — a former “superstation”, could dump the current reruns it airs and be repurposed as a new home for exiled conservative commentators like O’Reilly.

Regardless of your political persuasion, you will likely be paying a lot more for Sinclair TV stations on the cable or satellite dial. Sinclair is among the most aggressive station owners boosting prices for carriage agreements. Cable operators will continue to pass most, if not all of these fees on to subscribers in the form of higher rates or through “Broadcast TV” surcharges that are rarely mentioned by cable companies in their advertised rates.

In Utah, cable operators are already very familiar with Sinclair’s retransmission rate increases. The revenue has grown so significant, some station owner groups are buying up small independent TV stations just to cash in on the growing revenue they get from cable systems and subscribers.

CentraCom, a cable operator in Utah, reports it now pays over $10 as month for local stations, per subscriber, double what it paid in 2008, and they are prepared to see rates much higher than that in the future. Sinclair will also be motivated to force bundle its cable network Tennis Channel with its local stations when it negotiates with cable companies, whether they want the tennis network or not.

Sinclair Broadcast Group is getting 14 stations larger with the announced $240 million acquisition of TV stations in small markets owned and operated by Bonten Media.

• WCYB (NBC) and WEMT (Fox) serving eastern Tennessee and western Virginia
• WCTI (ABC) and WYDO (Fox) in North Carolina
• KCVU (Fox), KRCR (ABC), KRVU (MNT), KUCO (UNI), KAEF (ABC), KBVU (Fox), KECA (CW) and KEUV (UNI) in California
• KECI (NBC), KCFW (NBC) and KTVM (NBC) in Montana
• KTXS (ABC), KTES (Me-TV) and KTXE (ABC) in Texas

The station acquisitions will increase Sinclair’s presence in states where it already operates, and could directly affect cable and satellite TV customers because of Sinclair’s usual practice of demanding high compensation fees for permission to carry its stations on the pay TV dial.

WCTI-TV New Bern/Greenville/Washington/
Jacksonville, N.C. is just one of the stations being acquired by Sinclair.

The acquisition allows Sinclair to make advertising opportunities available on a larger number of stations and will help Sinclair expand the number of stations that carry its digital subchannel networks including Comet, a sci-fi channel, Charge!, which airs action-oriented programming, and TBD, a short-form programming network that relies heavily on online media productions.

“We look forward to welcoming the Bonten employees into the Sinclair family and are pleased to be growing our regional presence in several states where we already operate,” said Sinclair CEO Chris Ripley in a statement. “We believe our economies of scale help us bring improvements to small market stations, including investments in news, other quality local programming, and multicast opportunities with our emerging networks.”

The current deal is only a preview of the kind of TV station consolidation expected with Sinclair’s anticipated acquisition of Tribune Media, which owns familiar large market stations like WPIX-New York, KTLA-Los Angeles and WGN-Chicago.

Last week, FCC chairman Ajit Pai led the Commission to make it easier for large station owner groups to acquire more stations. Sinclair is currently the second-largest TV station owner in the U.S. (behind Nexstar Media Group) with 165 stations if its deal with Bonten is approved by regulators. Should it acquire Tribune, it would become the nation’s largest TV station operator by far.

Ajit Pai, Chairman of U.S Federal Communications Commission, delivers his keynote speech at Mobile World Congress in Barcelona, Spain, February 28, 2017. REUTERS/Eric Gaillard

WASHINGTON (Reuters) – The U.S. Federal Communications Commission voted 2-1 on Thursday to reverse a 2016 decision that limits the number of television stations some broadcasters can buy.

The decision could lead to a possible acquisition by Sinclair Broadcast Group Inc of Tribune Media Co, some Democrats in Congress said.

Tribune did not discuss any tie up, but said in a statement the FCC decision “will serve the important interest of localism by enabling broadcasters to better serve their communities.”

FCC Chairman Ajit Pai said he plans to take a new look at the current overall limit on companies owning stations serving no more than 39 percent of U.S. television households.

Democratic FCC Commissioner Mignon Clyburn called the vote a “huge gift for large broadcasters with ambitious dreams of more consolidation.” She said it “will have an immediate impact on the purchase and sale of television stations.”

Her concern was echoed by the top Democrat in the U.S. House of Representatives, who a day earlier urged the Federal Communications Commission to cancel the vote.

House Democratic Leader Nancy Pelosi warned that the changes could be harmful to consumers, hitting their wallets and their access to an independent media voice, as she cited press reports of a possible acquisition by Sinclair Broadcast Group Inc of Tribune Media Co stations.

Clyburn

In a letter, Pelosi and Representative Frank Pallone, who is the ranking Democrat on the House Energy and Commerce Committee, urged Pai to drop the plan, which could allow the Sinclair-Tribune tie-up.

“That would be bad news for consumers in Tribune’s markets in two ways: First, consumers would lose an independent voice in their media market; and second, consumers could see their cable bills go up because Sinclair charges cable operators more than Tribune for retransmission consent,” they wrote.

Another Democrat, Representative Anna Eshoo, wrote Pai asking him to drop the plan, saying that further consolidation “will ensure there are fewer independent news outlets serving as a counter-balance to misleading or inaccurate information.”

Meredith Corp spokesman Art Slusark said on Thursday the vote “may open up the opportunity for more acquisition opportunities … We are always interested in adding quality properties to our broadcast portfolio.”

Under rules adopted in 1985, stations with weaker over-the-air signals could be partially counted against a broadcaster’s ownership cap. But last year, the FCC under Democratic President Barack Obama said those rules were outdated after the 2009 conversion to digital broadcasting, which eliminated the differences in station signal strength. It revoked the rule in September.

There is a dispute over whether the FCC has the authority to amend the 39 percent ownership limit.

The 2016 decision did not require any company to sell existing stations, but could bar acquisitions. Twenty-First Century Fox Inc in September challenged the FCC rule in court.

Reuters reported in March that Sinclair had approached Tribune to discuss a potential combination, which would hinge on regulations being relaxed.

Pai said the FCC previously effectively tightened ownership rules and then companies previously below the national cap suddenly exceeded it. He said the FCC “did not examine whether the facts justified a more stringent cap.”

Pai, who was named by U.S. President Donald Trump to head the FCC in January, said it will begin a comprehensive review of the national cap this year. That could launch a new wave of consolidation in the broadcast television industry.

Clyburn cited comments from CBS Corp Chairman and Chief Executive Leslie Moonves in February that Pai would be “very beneficial to our business.” Moonves said the company would like to acquire more stations if the cap is lifted.

(Reporting by David Shepardson; Editing by Jonathan Oatis and Dan Grebler)

One of America’s handful of cable overbuilders that provide competing cable television service will be ripe for an acquisition or merger after launching an initial public offering that could raise as much as $750 million and make them a juicy target for a takeover.

WideOpenWest, which customers know better as WOW!, provides almost a half-million customers in Alabama, Florida, Georgia, Illinois, Indiana, Maryland, Michigan, Ohio, South Carolina and Tennessee with a choice of a second cable company. It has consistently won reasonably high scores in ratings issued by Consumer Reports and often offers better speed and service than incumbent providers. WOW has been quietly and slowly expanding service, but in the last two years has attracted the interest of private equity firms and Wall Street banks. One of those equity firms — Crestview Partners, invested $125 million in WOW 18 months ago. UBS Investment Bank and Credit Suisse have teamed up to manage the IPO.

Jeff Marcus, who also happens to be a partner in Crestview, has been named chairman of WOW. Avista Capital Partners still owns almost 60% of the company.

By entering the public market, WOW could quickly come under pressure from Wall Street analysts to get out of the cable business by selling the company and profiting investors. The drumbeat for mergers and acquisitions has only intensified with a corporate-friendly Trump Administration that has sought to appoint “hands-off” regulators at the FCC and Justice Department. There are several likely buyers — the various cable companies that face direct competition from WOW and would like shut the company down and upstarts like Altice, which has targeted smaller cable operators like Cablevision and Suddenlink.

Marcus has telegraphed he is isn’t in a hurry to spend investors’ money, which could leave WOW flush with cash, something else attractive in a takeover. Multichannel News reports that one of WOW’s “main directives” would be to offer “video, voice, and data services in packages that consumers want,” — hardly a revolutionary concept. In a July interview, Marcus made it clear there was ‘no burning need to increase scale.’ That tells would-be buyers the company hasn’t any immediate plans to spend a lot of money or expand service, things that could drive away some buyers.

“It’s all opportunistic,” Marcus said. “When I started Marcus Cable with 18,000 subscribers, I had no idea that it would get to 1.3 million. One thing led to another and we took advantage of opportunities as they presented themselves. I think that’s what is going to happen here.“

A wealth opportunity for Marcus would be collecting significant proceeds selling the operation. There is a good chance WOW will either buy other companies or be bought itself as the cable industry consolidation wave continues. Other operators about its size — Cable ONE and until recently NewWave Communications, have been considered takeover targets for years. NewWave was acquired by CableONE in January for $735 million in cash, coincidentally slightly less than the potential upper limit of WOW’s proceeds from an IPO.