Charter Communications has completed its previously announced transaction with Cox Communications and its acquisition of Liberty Broadband, creating a significantly larger broadband, video and mobile platform operating under the Spectrum brand across 45 states.
As part of the Cox transaction, a subsidiary of Cox Enterprises received approximately 33.6 million common units in Charter Holdings with an implied value of about $5 billion, $6 billion of convertible preferred units carrying a 6.875% coupon, and approximately $4 billion in cash.
In aggregate, Charter issued the equivalent of just over 46 million shares to Cox Enterprises.
Following completion of both the Cox and Liberty Broadband transactions, Cox Enterprises and its subsidiaries own approximately 26% of the combined company’s fully diluted shares on an as-converted and as-exchanged basis.
Approximately $12 billion of Cox debt and finance leases also remain outstanding at Charter subsidiaries following the transaction.
Charter simultaneously completed its transaction with Liberty Broadband.
Liberty Broadband common shareholders received 0.236 of a Charter common share for each Liberty Broadband common share held, with cash paid for fractional shares.
Liberty Broadband preferred shareholders received newly issued Charter preferred shares that substantially mirror the terms of the securities they previously held.
Charter retired approximately 38.6 million shares previously owned by Liberty Broadband while issuing about 33.9 million shares to Liberty Broadband common shareholders.
The transaction therefore resulted in a net reduction of approximately 4.7 million Charter shares outstanding.
Charter also assumed roughly $840 million of Liberty Broadband net debt, which it expects to repay shortly after closing, and approximately $180 million of preferred equity that became Charter preferred equity.
The integration will quickly become visible to customers.
Beginning immediately, Spectrum is offering Cox internet customers who do not already subscribe to Cox Mobile one free year of mobile service.
In mid-September, Charter plans to introduce the full Spectrum product, pricing and packaging portfolio across former Cox markets.
Spectrum said the expanded offering will combine broadband and mobile services over its fiber network and approximately 45 million WiFi access points nationwide.
Spectrum also plans to bring its broader video offering into Cox markets.
Spectrum TV Select includes a group of ad-supported streaming services such as Disney+, Hulu, ESPN Unlimited, Discovery+, HBO Max, Paramount+, Peacock, AMC+, ViX, Tennis Channel and FOX One, which Charter says represent up to $127 in monthly retail value at no additional cost.
Within the next year, former Cox customers are also expected to gain access to Spectrum’s customer service commitments.
Those include a 100% U.S.-based customer service team available around the clock, same-day technician dispatch when requested before 5 p.m. when possible, and credits for qualifying outages lasting more than two hours.
Over the next 18 months, Spectrum plans to apply its sales and service workforce model to Cox markets and return Cox’s customer service function fully to the U.S.
Employees will receive starting wages of at least $20 per hour along with benefits including medical, dental and vision coverage, retirement benefits, discounted Spectrum services, education programs and participation in Charter’s employee stock purchase program.
The combination also brings Cox Business, Segra and RapidScale into Charter’s broader commercial platform.
Charter said the enlarged organization should give business customers access to a deeper mix of fiber connectivity, managed cloud services and enterprise communications capabilities.
Spectrum also intends to expand its advertising operations and local news presence into former Cox markets.
Spectrum Networks currently operates more than 35 stations across Charter’s footprint and plans to enter additional designated market areas following the transaction.
The transaction also reshapes Charter’s governance.
Alex Taylor, Chairman and CEO of Cox Enterprises, has been appointed Chairman of Charter, while Eric Zinterhofer becomes lead independent director.
Charter President and CEO Chris Winfrey remains in his current role and continues to serve on the board.
Cox Enterprises also appointed Dallas Clement and Mark Greatrex to Charter’s 13-member board.
Liberty Broadband ceased to be a direct Charter shareholder at closing and no longer has the right to designate Charter directors.
Several directors associated with Liberty Broadband have stepped down as part of the transition.
Within one year, Charter plans to change the name of its parent company to Cox Communications while continuing to operate under the Spectrum brand across all markets.
The company will remain headquartered in Stamford, Connecticut, while maintaining a significant presence in Atlanta.
Charter said the combined platform now makes Spectrum services available to more than 70 million homes and businesses across 45 states.
KEY QUOTES:
“The addition of Cox to the Spectrum footprint is one that can be celebrated by customers, employees and investors alike. Together, we will bring the best products, at the best price, coupled with the highest level of customer service to more customers across our expanded 45-state Spectrum footprint.”
“The market has changed considerably over the past decade, and regional providers like Spectrum are competing with national and even global connectivity and entertainment companies. Today, with expanded scale, we are better positioned to compete and continue investment in our products and service, tools and platforms, and to further the capability and reach of our Spectrum Fiber Broadband Network.”
Chris Winfrey, President And CEO Of Charter Communications
“For generations, my family has believed in building businesses that matter and stand the test of time. The broadband industry has shaped how people live, work and connect with one another, and we believe deeply in its future. I look forward to partnering with Chris and the board to build on a proud legacy and create long-term value for our shareholders, customers, employees and the communities we serve.”
Alex Taylor, Chairman And CEO Of Cox Enterprises And Chairman Of Charter
“When Liberty first invested in Charter more than a decade ago, we saw an opportunity to build scale behind a great management team and operating model. The combination of Charter and Cox creates a stronger, more competitive company to further invest and innovate, while giving Liberty Broadband shareholders a direct interest in its future.”
Dr. John C. Malone, Chairman Of Liberty Broadband
