Charter Communications and Time Warner Cable (TWC) have entered into a definitive merger agreement which values the latter at USD78.7 billion. Under the deal, Charter will provide USD100.00 in cash and shares of a new public parent company (‘New Charter’) equivalent to 0.5409 existing Charter shares for each outstanding TWC share. Based on Charter’s market closing price on 20 May, the deal values each TWC share at USD195.71. In addition, Charter will provide an election option for each TWC stockholder – excepting Liberty Broadband Corporation and Liberty Interactive Corporation, which will take all-stock – to receive USD115.00 of cash and New Charter shares equivalent to 0.4562 shares of Charter for each TWC share they own.
Running parallel to the TWC deal, Charter and Advance/Newhouse Partnership – the parent company of smaller rival Bright House Networks – have announced that the two companies have amended the agreement which they signed on 31 March 2015, whereby Charter will acquire Bright House for USD10.4 billion. The amended agreement provides for Charter and Advance/Newhouse to form a new partnership (the ‘Partnership’) of which New Charter will own between 86% and 87% and of which Advance/Newhouse will own between 13% and 14%, depending on the TWC shareholders’ cash election option detailed above. The consideration to be paid to Advance/Newhouse by Charter will include common and convertible preferred units in the Partnership, in addition to USD2 billion in cash. The common and convertible preferred partnership units will each be exchangeable into shares of New Charter. The Charter-Advance/Newhouse transaction is expected to close contemporaneously with the Charter-TWC transaction.
Charter also announced that Liberty Broadband has agreed to purchase, upon closing of the TWC transaction, USD4.3 billion of newly issued shares of New Charter at a price equivalent to USD176.95 per share (i.e. Charter’s closing price on 20 May). Liberty Broadband will also purchase, upon closing of the Charter-Advance/Newhouse transaction, USD700 million of newly issued Charter shares at a price equivalent to USD173.00 per Charter share.
Subject to the completion of all the above, TWC shareholders – excluding Liberty Broadband and its affiliates – are expected to own between 40% and 44% of New Charter, Advance/Newhouse is expected to own between 13% and 14%, and Liberty Broadband is expected to own between 19% and 20%. The combination of Charter, TWC and Bright House will create the second largest broadband provider in the US – behind cable giant Comcast – serving around 23.9 million customers across 41 states.