As predicted, John Malone’s Liberty Media has agreed to buy about 27% of Charter Communications for about $2.62 billion, helping Liberty re-establish itself as a player in cable TV. Charter is the eighth biggest pay-TV provider, with some 4.2 million video subscribers.
Liberty entered into a deal with investment funds managed by or affiliated with Apollo Management, Oaktree Capital Management and Crestview Partners to acquire 26.9 million shares and 1.1 million warrants in Charter, for $95.50 a share, a 2.6% discount of Monday’s closing price.
“We are excited to make this investment in Charter, the fourth largest cable provider in the US,” said Greg Maffei, Liberty President and CEO. “Tom Rutledge and his team have done an impressive job of turning around Charter’s operations and improving its financial position. We look forward to working with Charter’s management team and fellow board members in the future.”
“We are pleased with Charter’s market position and growth opportunities and believe that the company’s investments in its high-capacity digital network which provides digital HD and on demand television, high-speed data and voice, will benefit its customers and shareholders alike,” said John Malone, Liberty Chairman.
“This transaction reflects a solid endorsement of the strategy that Tom Rutledge and his team are implementing at Charter,” said Eric Zinterhofer, Chairman of Charter. “Apollo, Oaktree, and Crestview have created substantial value for Charter and its shareholders, and on behalf of Charter’s board, we look forward to working with Liberty Media in creating further value.”
Tom Rutledge, CEO and President of Charter, said, “Liberty Media and John Malone have a well proven track record in our industry and in creating shareholder value. While we have made real progress, we are still in the beginning of our effort to transform Charter, and we welcome the addition of Liberty Media as knowledgeable shareholders as we grow our products, service capabilities, and market share. All of us at Charter appreciate the contributions of Apollo, Oaktree and Crestview which put us on a path for sustainable success.”
The transaction is expected to close in the first half of the second quarter of 2013, subject to the satisfaction of customary closing conditions, including expiration of the waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
Upon closing, funds managed by Crestview and Oaktree will hold approximately 7.4% and 2.2%, respectively, of Charter’s common shares. The deal is expected to close in the first half of Q2. Charter’s board appointed a special committee of directors to consider the transaction.
In addition, Liberty Media agreed to not increase its beneficial ownership in Charter above 35% until January 2016 and 39.99% thereafter. Liberty also agreed not to engage in proxy solicitations for nominations to Charter’s board through the 2015 shareholder meeting and continue to so refrain as long as its designees are nominated to the Charter board or the agreement is earlier terminated.
RBR-TVBR observation: The buy would be Malone’s first big investment in a cable operator in the US since he sold Tele-Communications to AT&T for $48 billion in 1999. In February, Charter agreed to buy Cablevision System’s Optimum West cable systems for $1.6 billion in cash.