Charter Communications has agreed to pay $10.4 billion for Bright House Networks, a move that will help it to build scale in the U.S. cable market.
The U.S. cableco on Tuesday announced it had reached a definitive agreement with Bright House’s parent company Advance/Newhouse, a subsidiary of Advance Publications. Under the terms of the deal the pair will contribute their assets to a Charter unit with Charter taking a 73.7% stake and Advance/Newhouse the remainder; the latter will also receive $2 billion in cash.
Bright House has built out cable networks in Florida, Alabama, Indiana, Michigan and California and serves around 2 million customers. According to Charter, it is the sixth largest cableco in the U.S.
"Bright House has built outstanding cable systems in attractive markets that are either complete, or contiguous with the New Charter footprint," said Charter CEO Tom Rutledge. "This acquisition enhances our scale, and solidifies New Charter as the second largest cable operator in the U.S."
Referring to the company as New Charter stems from the ongoing cable consolidation in the U.S. and the complex web of transactions that ensued from rival player Comcast’s deal to acquire Time Warner Cable for $45.2 billion in February last year. As it stands, Charter is the fourth-largest cable company in the U.S., but once the Comcast/TWC deal closes – and related transactions including the sale of 1.4 million TWC customers to Charter – it will jump ahead of Cox Communications and take the number two position.
The closure of those deals is a prerequisite for the completion for the Bright House buy. In addition, Charter needs the approval of its shareholders and regulatory bodies, and it must wait until TWC’s first right of refusal for Bright House has expired before it can close.
Charter’s largest shareholder Liberty Broadband has agreed to purchase $700 million in newly-issued New Charter shares on completion of the deal. As a result it will retain a 19.4% stake in the company.
Industry watchers predict there could be more M&A announcements to come from Charter as it seeks to compete with the enlarged Comcast.
