STAMFORD, Conn. and ENGLEWOOD, Colo.—Charter Communications said it has entered into a deal to acquire Liberty Broadband in an all-stock transaction, a move intended to simplify the media holdings of Liberty Broadband’s controlling shareholder, John Malone.
Liberty Broadband is the largest shareholder in Charter, the largest U.S. pay TV provider, which does business under the Spectrum brand. Its major assets include about 45.6 million shares in Charter as well as Alaskan telecommunications company GCI, which will be spun off when the acquisition of Liberty Broadband is complete.
The deal comes as Malone, a pioneer of the U.S. cable industry and chairman of Liberty Broadband, is moving to streamline his media and telecom assets. On Wednesday (Nov. 13), Malone-controlled Liberty Media said it would split into two companies, one focused on sports and the other on live entertainment, The Wall Street Journal reported. As part of the spinoff, Liberty Media CEO Greg Maffei will step down.
“We are pleased to announce this agreement today with Liberty Broadband. I am grateful for Liberty Broadband’s strategic partnership since 2013, and particularly for the support of John Malone, Greg Maffei and our Liberty Broadband-nominated board members,” Charter president and CEO Chris Winfrey said in a statement. “We look forward to their continued partnership and support in the coming years in driving value for our shareholders.”
Added Malone: “Today’s announced transaction will rationalize Liberty Broadband’s trading discount and ultimately provide our shareholders with enhanced liquidity. The transaction closing timeline reflects my belief in Charter’s operating strategy under the excellent leadership of Chris Winfrey and team and the value creation opportunity for both Charter and Liberty shareholders. I look forward to that continued upside, and to holding Charter shares after the merger closing.”
Under the agreement, each holder of Liberty Broadband Series A, B and C common stock, will receive 0.236 of a share of Charter common stock per share of Liberty Broadband common stock held, with cash to be issued for fractional shares. Each holder of Liberty Broadband Series A cumulative redeemable preferred stock will receive one share of newly issued Charter cumulative redeemable preferred stock per Liberty Broadband share, with the Charter preferred stock substantially mirroring the current terms of the Liberty Broadband preferred stock, Charter reported.
As a result of the transaction, Charter expects to retire about 45.6 million Charter shares currently owned by Liberty Broadband and to issue roughly 34.0 million shares to holders of Liberty Broadband common stock at closing, resulting in a net decrease of about 11.5 million Charter shares outstanding. Liberty Broadband has existing debt of $2.6 billion (excluding debt at GCI) that will be repaid prior to closing or assumed by Charter, and $180 million of preferred equity that will become Charter preferred equity following the deal’s close, the companies said.
John Malone and certain related holders have agreed to vote, subject to certain exceptions, shares beneficially owned by them, representing about 48% of the aggregate voting power of Liberty Broadband, in favor of the transaction, the companies said.
Maffei and certain related Liberty shareholders have agreed to vote, subject to certain exceptions, shares beneficially owned by them, representing about 4% of the aggregate voting power of Liberty Broadband, in favor of the transaction.
“We are pleased to have reached definitive terms with Charter and provide Liberty shareholders with certainty of a future transaction at an attractive exchange ratio,“ Maffei said. “This transaction simplifies our corporate structure and allows our shareholders to participate in Charter’s upside through direct ownership of the equity.
“In connection with the transaction, we expect GCI will become an independent public company prior to close, Liberty has had a great partnership with Ron Duncan and GCI management since 2018 and will continue to participate in value creation opportunities for the business,” Maffei added. “Reaching this agreement was an important milestone in my leadership of the company, and I will be stepping down from my role as Liberty Broadband CEO at the end of this year. I look forward to continuing as a director of Charter and a meaningful shareholder.”
Centerview Partners is the exclusive financial adviser to Charter’s special committee, with Citi serving as Charter’s exclusive financial adviser. Wachtell, Lipton, Rosen & Katz is serving as the special committee’s legal counsel. J.P. Morgan is the exclusive financial adviser to Liberty Broadband, with O’Melveny & Myers serving as its legal counsel.
