John Malone's Liberty Media to Take 27.3 Percent Stake in Cable Operator Charter
UPDATED: The price tag of the deal, which marks Malone's return to the U.S. cable business, amounts to nearly $2.62 billion, or $95.50 per share.
Charter Communications and John Malone's Liberty Media have reached a definitive agreement for the latter to acquire a stake of approximately 27.3 percent in Charter.
The price tag amounts to $2.617 billion, or $95.50 per share, the companies said Tuesday. Liberty expects to fund the purchase of the stake in Charter, which is led by CEO Tom Rutledge, a former COO of Cablevision Systems, with a combination of cash on hand and new loans. It will acquire stock currently held by investment firms Apollo Management, Crestview Partners and Oaktree Capital Management.
Liberty gets the right to designate up to four Charter board members. But the company agreed not to increase its stake in Charter above the 35 percent mark until Jan. 2016 or above 39.99 percent thereafter, the companies said.
"We are excited to make this investment in Charter, the fourth-largest cable provider in the U.S.," said Liberty president and CEO Greg Maffei. "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."
Said Malone: "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."
"This transaction reflects a solid endorsement of the strategy that Tom Rutledge and his team are implementing at Charter," said Charter chairman Eric Zinterhofer.
Said Rutledge: "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."
The transaction is expected to close in the first half of the second quarter. Upon closing of the deal, Crestview and Oaktree will hold stakes of approximately 7.4 percent and 2.2 percent, respectively, in Charter.
Liberty said it expects to designate Malone, Maffei, Nair Balan, executive vp and chief technical officer of Liberty Global, and Michael Huseby, CFO of Barnes & Noble and a former CFO of Charter and Cablevision, to Charter's board.
Charter's stock jumped on Monday amid reports of the likely Liberty investment.