Charter Communications has struck a deal to acquire fellow US cable operator Bright House Networks for US$10.4bn.
The consideration is made up of US$8.4bn of partnership units and US$2bn in cash.
Charter and Bright House’s owner, Advance Newhouse,…
Charter Communications has struck a deal to acquire fellow US cable operator Bright House Networks for US$10.4bn.
The consideration is made up of US$8.4bn of partnership units and US$2bn in cash.
Charter and Bright House’s owner, Advance Newhouse, plan to form a partnership and both contribute all of their cable assets to it. Charter will then own 73.7% of the partnership, and Advance Newhouse will hold the remaining 26.3% in common and convertible preferred units.
Advance Newhouse will receive 34.3 million exchangeable common partnership units priced at US$173, equating to US$5.9bn, and 10.3 million preferred partnership units convertible at US$242.19, totalling US$2.5bn, that will pay a 6% coupon. It will also be paid US$2bn in cash.
Meanwhile Liberty Broadband, Charter’s largest shareholder with 26%, will buy US$700m of Charter common stock at a price of US$173 per share in connection with the deal. Liberty Broadband was spun-off from Liberty Media last year and its largest individual backer is cable veteran John Malone.
The takeover marks the latest consolidation in the sector off the back of market leader Comcast’s audacious takeover of Time Warner Cable, which – if approved by US regulators – will combine the country’s two largest cable companies.
As part of that deal Comcast is divesting 1.4 million subscribers to Charter. Charter’s acquisition of Bright House depends on that transaction closing, which is in turn contingent on the Comcast-TWC deal being approved.
The Bright House acquisition also requires approval from Charter’s shareholders and from the regulators, and is subject to Time Warner Cable’s right of first offer for Bright House expiring.
Bright House’s operations are centred in Florida, but it also has systems in Alabama, California, Indiana and Michigan, serving two million customers. Tom Rutledge, president and CEO of Charter, said Bright House had built “outstanding cable systems in attractive markets that are either complete, or contiguous” with his company’s footprint. Charter has more than six million customers across 28 states.
“This acquisition enhances our scale, and solidifies New Charter as the second largest cable operator in the US,” Rutledge said in a statement.
Charter was advised by Goldman Sachs and LionTree Advisors on the transaction. Wachtell, Lipton, Rosen & Katz is Charter’s counsel and Kirkland & Ellis is advising on financing, which is yet to be disclosed.
UBS advised Advance Newhouse and Bright House. Their lawyers are Sabin, Bermant & Gould and Sullivan & Cromwell.
