Charter to buy Bright House Networks for USD 10.4 billion

Charter Communications announced an agreement to acquire Bright House Networks from media group Advance/Newhouse for USD 10.4 billion. Bright House is the sixth-largest cable operator in the US and will give Charter another 2 million customers in central Florida, Alabama, Indiana, Michigan and California.
Advance/Newhouse will take a 26.3 percent stake in a new partnership set up to run both the Bright House and Charter operations. Charter will hold 73.7 percent in the partnership. Advance/Newhouse will receive common and preferred shares in the partnership worth USD 8.4 billion as well as USD 2 billion cash from Charter as payment. It also will have the right to convert its shares in the partnership into shares of Charter.

Completing the deal remains subject to a number of factors, including Charter shareholder approval, the expiry of Time Warner Cable's right of first offer for Bright House, the close of Charter's previously-announced transactions with Comcast and regulatory approval. Bright House was previously run as a partnership between Time Warner and Advance/Newhouse, and TWC still handles many of Bright House's carriage agreements. Charter meanwhile is waiting for regulatory clearance of Comcast's planned takeover of TWC, part of which will include the merged company selling some assets to Charter. Charter said much of the Bright House footprint is complementary to its own network once it completes the Comcast deal. Bright House also offers tax, financial and operating benefits, Charter said.

As part of the deal, Charter's largest current shareholder Liberty Broadband agreed to subscribe to USD 700 million in new shares in Charter. These will be valued at the same price as the conversion price promised to Advance/Newhouse. On a pro forma basis for the conversion and other planned share issues by Charter, Advance/Newhouse would become its largest shareholder with a 26.3 percent stake, while Liberty Broadband would have 19.4 percent.

Advance/Newhouse also agreed to grant Liberty Broadband a voting proxy on part of its shares for the five years following the close of the transaction, so that Liberty Broadband would have a blocking stake of 25.01 percent. The proxy excludes votes on certain, unspecified matters. Under a shareholders agreement between Advance/Newhouse and Liberty broadband, the two companies would also have pre-emptive rights on each others' shares in Charter. Each would also have three members on Charter's 13-member board.