Charter Communications (CHTR) and Liberty Broadband (LBRDK) (LBRDA) (LBRDA, LBRDK, LBRDP) announced that they have entered into a definitive agreement under which Charter has agreed to acquire Liberty Broadband in an all-stock transaction. 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, with cash to be issued in lieu of fractional shares. 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, which Charter preferred stock will substantially mirror the current terms of the Liberty Broadband preferred stock. Liberty Broadband’s principal assets currently consist of approximately 45.6M common shares of Charter and its subsidiary GCI, Alaska’s largest communications provider. Liberty Broadband has agreed to spin off its GCI business by way of 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 $420M, 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 transaction, Charter expects to retire the approximately 45.6M Charter shares currently owned by Liberty Broadband and to issue approximately 34M shares to holders of Liberty Broadband common stock at the closing, resulting in a net decrease of approximately 11.5M Charter shares outstanding. Liberty Broadband has existing debt of $2.6B (excluding debt at GCI) that will be repaid prior to closing or assumed by Charter, and $180M of preferred equity that will become Charter preferred equity following the close of the transaction. The transaction was unanimously recommended to the Charter Board of Directors for approval by a special committee composed of independent, disinterested directors and advised by independent financial and legal advisors. The Boards of Directors of both Charter and Liberty Broadband have approved the transaction, which is subject to customary closing conditions.
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