Liberty Puts Up $2.6B for 27% Stake in Charter

LR Cable News Analysis Jeff Baumgartner, Senior Editor, Light Reading 3/19/2013

John Malone has struck again. His Liberty Media Corp. announced Tuesday that it will invest $2.617 billion to secure a 27.3 percent stake in Charter Communications Inc. (See Liberty Invests $1.6B In Charter.) Under the deal, Liberty Media will acquire roughly 26.9 million shares and 1.1 million warrants in Charter at a price of $95.50 per share (Charter closed at $98.04 on Monday). Liberty, which will end up with a chunk of the nation's fourth-largest cable operator, will fund the purchase via a combo of cash and new loan arrangements. New Charter CEO and President Tom Rutledge is on board to turn around the MSO, which exited Chapter 11 bankruptcy in 2009. "While we have made real progress, we are still in the beginning of our effort to transform Charter, and we welcome the addition of Liberty Media as knowledgeable shareholders as we grow our products, service capabilities, and market share," Rutledge said, in a statement. The deal is expected to close in the first half of the second quarter of 2013. The Wall Street Journal reported Monday that the deal was imminent. (See Will Malone Make a Charter Connection?) Why this matters
The deal gives Charter some extra financial backing and guidance from one of the industry's top strategists in John Malone. The buy also gives Malone a significant ownership stake in a U.S.-based MSO for the first time since he sold Tele-Communications Inc. (TCI) to AT&T Inc. in 1998. The deal will likely spark speculation that Liberty Media might eventually try to make a bigger play and take a controlling interest of Charter and its systems that serve about 5.2 million subscribers. However, Liberty, whose Liberty Global unit is in the process of buying U.K.-based Virgin Media Inc., has agreed to not increase its stake in Charter above 35 percent until January 2016, and 39.99 percent thereafter. For more

— Jeff Baumgartner, Site Editor, Light Reading Cable