Charter Communications has sealed a deal to acquire John Malone‘s Liberty Broadband in the latest media chess move by Malone.
While it is far from the glitzy spotlight of Warner Bros. Discovery, Formula One or other parts of Malone’s investment portfolio, the broadband deal has been closely tracked as the parties negotiated in recent months. Malone is also a major shareholder in Charter, the No. 1 pay-TV provider in the U.S. as well as a major broadband distributor. Over the decades, the billionaire has gained a reputation for executing dozens of spinoffs, M&A deals and tracking stock launches in an effort to avoid taxes and benefit shareholders.
Under the terms of the agreement, each holder of Liberty Broadband Series A common stock, Series B common stock, and Series C common stock will receive 0.236 of a share of Charter common stock per share of Liberty Broadband common stock held.
Each holder of Liberty Broadband Series A cumulative redeemable preferred stock will receive one share of newly issued Charter cumulative redeemable preferred stock per share of Liberty Broadband preferred stock held. Charter preferred stock will “substantially mirror” the current terms of the Liberty Broadband preferred stock, a press release said.
Liberty Broadband’s main assets are about 45.6 million common shares of Charter and its subsidiary GCI, Alaska’s largest communications provider. Liberty Broadband has agreed to spin off its GCI business via a distribution to the stockholders of Liberty Broadband prior to the closing of the acquisition of Liberty Broadband by Charter.
The GCI distribution is expected to be taxable to Liberty Broadband and its stockholders, with Charter bearing the corporate level tax liability upon completion of the combination. However, to the extent such corporate level tax liability exceeds $420 million, Charter will be entitled under a tax receivables agreement to the portion of the tax benefits realized by GCI corresponding to such excess. The companies currently expect the transaction to close on June 30, 2027 unless otherwise agreed, subject to the completion of the GCI spin-off and other customary closing conditions.
As a result of the deal, Charter expects to retire the approximately 45.6 million Charter shares currently owned by Liberty Broadband and to issue approximately 34 million shares to holders of Liberty Broadband common stock at the closing, resulting in a net decrease of about 11.5 million Charter shares outstanding.
The $2.6 billion in Liberty Broadband debt (excluding debt at GCI) will be repaid prior to closing or assumed by Charter, and $180 million of preferred equity that will become Charter preferred equity.
“We are pleased to announce this agreement today with Liberty Broadband. I am grateful
for Liberty Broadband’s strategic partnership since 2013, and particularly for the support of John
Malone, Greg Maffei and our Liberty Broadband nominated board members,” Charter CEO Chris
Winfrey said. “We look forward to their continued partnership and support in the coming years in driving value for our shareholders.”
Malone said the deal “will rationalize Liberty Broadband’s trading discount and ultimately provide our shareholders with enhanced liquidity.” Projecting a 2027 close for the deal, three years in the future, he added, “reflects my belief in Charter’s operating strategy under the excellent leadership of Chris Winfrey and team and the value creation opportunity for both Charter and Liberty shareholders. I look forward to that continued upside, and to holding Charter shares after the merger closing.”