In massive industry news, Charter Communications and its subsidiaries reached a definitive agreement to merge with Cox Communications. The proposed transaction will combine both businesses, creating an industry leader in mobile and broadband communications services, seamless video entertainment and customer service.
It will also deliver countless benefits for their partners, customers, shareholders and communities, said the companies.
“We’re honored that the Cox family has entrusted us with its impressive legacy and are excited by the opportunity to benefit from the terrific operating history and community leadership of Cox,” said Charter’s president and CEO, Chris Winfrey.
“Our family has always believed that investing for the long-term and staying committed to the best interests of our customers, employees and communities is the best recipe for success,” said Alex Taylor, the chairman and CEO of Cox Enterprises. “In Charter, we’ve found the right partner at the right time and in the right position to take this commitment to a higher level than ever before, delivering an incredible outcome for our customers, employees, suppliers and the local communities we serve.”
The proposal will also see Taylor step in as chairman of the joint company.
Per the terms, Charter will acquire Cox Communications’ commercial fiber and managed IT and cloud businesses, with Cox Enterprises to contribute Cox Communications’ residential cable business to Charter Holdings, an existing subsidiary partnership of Charter.
As consideration in the transaction, Cox Enterprises will receive:
- $4 billion in cash.
- $6 billion in convertible preferred units in Charter’s existing partnership, which are convertible into Charter partnership units, then exchangeable for Charter common shares.
- 33.6 million common units in Charter’s existing partnership (implied value of $11.9 billion), and which are exchangeable for Charter common shares.
Based on Charter’s share count as of Mar. 31, Cox Enterprises will own approximately 23 percent of the combined entity’s fully diluted shares outstanding, on an as-converted, as-exchanged basis. The combined entity will assume Cox’s approximately $12 billion in outstanding debt.
Within one year of closing, the combined company will rebrand as Cox Communications, and be headquartered in Stanford, Conn., while maintaining a presence at Cox’s Atlanta, Ga., campus. Spectrum, meanwhile, will become the consumer-facing brand within the communities in which Cox serves.
It is also expected that the combination will be contemporaneously completed with Charter’s previously announced Liberty Broadband acquisition, resulting in Liberty ceasing to exist as a direct shareholder and no longer able to designate directors for election to the Charter Board. The three current Liberty Broadband nominees on Charter’s board will resign at closing; Liberty shareholders will receive direct interests in Charter.
In terms of personnel, Winfrey will continue as president, CEO and director, and Taylor will join the board as chairman.
The combined company’s products will launch across Cox’s approximately 12 million passings and six million existing customers, under the Spectrum brand. This includes Spectrum’s Advanced WiFi, Spectrum Mobile with Mobile Speed Boost, the Spectrum TV App, Seamless Entertainment and Xumo.
Charter customers will also benefit from Cox Business’ presence in business telecom, including Segra and RapidScale, said the companies. And according to the companies, the move will bring an investment in more U.S.-based employees, including a return of Cox’s customer service function to the U.S.
Charter expects approximately $500 million of annualized cost synergies achieved within three years of close – stemming from typical procurement and overhead savings.
The merger is subject to customary closing conditions, including regulatory and Charter shareholder approvals.
