Charter Communications Announces $34.5 Billion Acquisition of Cox
In a significant move to reshape the cable television landscape, Charter Communications has agreed to acquire Cox Communications for a staggering $34.5 billion. This merger will unite two of the United States’ largest cable companies and expand their combined reach from metropolitan areas like New York to Southern cities including Atlanta.
Details of the Acquisition
The acquisition values Cox’s equity at approximately $21.9 billion, resulting in an enterprise value of $34.5 billion, which includes its existing debt. The companies announced that the merger is part of a strategic effort to bolster their market position amidst rising competition from streaming services.
Job Creation Initiative
As part of the announcement, the companies emphasized their commitment to domestic job creation, stating, “We’ll onshore jobs from overseas to create new, good-paying careers for US employees.” This approach may help garner political support amidst anticipated antitrust scrutiny.
Cox’s Legacy and Assets
Cox Communications, a family-run enterprise with a history spanning 127 years, will retain its name through the merger, as the combined entity is projected to be rebranded as Cox Communications within a year post-merger.
Retained Assets
The transaction will only encompass Cox’s communications assets. Notably, the company’s media holdings, including notable entities like Axios and the Atlanta Journal-Constitution, will remain with the Cox family.
Financial Breakdown for Shareholders
Cox shareholders stand to gain substantially from this deal, which offers them $11.9 billion in equity, $6 billion in a convertible note, and $4 billion in cash. Following the completion of the merger, they are expected to hold roughly 23% of the new entity.
Market Reactions
In response to the announcement, Charter’s stock fell by 2% in pre-market trading in New York, reflecting investor concerns over the implications of the acquisition.
Strategic Industry Consolidation
This acquisition marks yet another strategic effort by Charter’s shareholder, John Malone, a prominent figure in the cable industry, to consolidate power amid increasing pressure from digital competitors. Malone has been actively pursuing various consolidation strategies, including a recent proposal to merge Charter with Liberty Broadband, the key investor in Spectrum broadband services.
Company Infrastructure
Currently, Charter delivers cable and broadband services to 57 million homes across 41 states, with a network infrastructure that encompasses over 30 states and serves approximately 12 million homes and businesses. The company anticipates that the acquisition will yield annual savings of $500 million within three years, assisting in managing the considerable $12 billion debt expected from Cox’s operations.
Advisory Teams
In terms of advisory support, Citigroup and LionTree acted as financial advisors to Charter, while legal representation was provided by Wachtell. Cox was advised by Allen & Company, BDT & MSD, Evercore, and Wells Fargo, with legal counsel from Latham & Watkins.