Charter has moved to acquire Liberty Broadband in a transaction that includes Liberty Broadband's stake in Charter but not GCI, Alaska's largest cable operator. GCI will be spun off as an independent public company.
Charter Communications has secured a deal to acquire Liberty Broadband. The all-stock transaction includes Liberty Broadband's stake in Charter but does not include GCI, Alaska's largest cable operator.
Liberty Broadband's assets include a 26% stake in Charter (via about 45.6 million common shares), a 16% stake in analytics and ad measuring specialist Comscore and all of GCI. Alaskan operator GCI plans to shut down its pay-TV services by mid-2025 and apply its resources toward broadband and mobile. Liberty Broadband also carries a current debt of $2.6 billion (excluding debt at GCI) that will be prepaid before closing or assumed by Charter.
Under the deal, Liberty Broadband has agreed to spin off GCI in a transaction expected to be taxable to Liberty Broadband and its stockholders. The companies expect the transaction to close on June 30, 2027, subject to the completion of the GCI spin-off and other closing conditions.
GCI, led by CEO and co-founder Ron Duncan, is slated to become an independent public company before close.
GCI not a good fit for Charter – analyst
Charter likely doesn't have an appetite to acquire GCI because it's not a great fit, New Street Research analyst Jonathan Chaplin reasoned in a research note issued Wednesday afternoon.
"We suspect the Charter management team felt synergies were few and they didn't have a clear path to increase its value. As such, as disciplined capital allocators, it didn't make sense to buy it," he explained.
GCI, which also runs a mobile network, "has been a good asset that has been well run, but the asset and the competitive dynamics in the market have always been different from the 'lower 48,' Chaplin added. "Charter would love to acquire Cable assets where they can capture value by extracting synergies and/or by improving the underlying operations. GCI doesn't fit this mold."
The proposed sale of Liberty Broadband (minus GCI) is marked by complexities that are a hallmark of any transaction involving cable and media magnate John Malone.
Each holder of Liberty Broadband Series A common stock, Series B common stock and Series C common stock will receive 0.236 of Charter common stock per share of Liberty Broadband common stock held. Tied in, Charter expects to retire the 45.6 million Charter shares currently owned by Liberty Broadband and to issue about 34 million shares to holders of Liberty Broadband common stock at closing, resulting in a net decrease of 11.5 million Charter shares outstanding.
The reasoning? "Today's announced transaction will rationalize Liberty Broadband's trading discount and ultimately provide our shareholders with enhanced liquidity," John Malone, Liberty Broadband's chairman, said in a statement.
"This transaction simplifies our corporate structure and allows our shareholders to participate in Charter's upside through direct ownership of the equity," added Liberty Broadband CEO Greg Maffei, a long-time Malone associate who announced today that he is stepping down as president and CEO of Liberty Media at the end of 2024. Malone will assume the role of interim CEO of Liberty Media, which also announced today a planned split-off of Liberty Live Group, a unit that includes Liberty Media's interest in Live Nation.
Or, as New Street Research's Jonathan Chaplin put it in a research note: The transaction "is a very straightforward transaction in which Charter is effectively repurchasing their own shares at a discount.”
Editor's note: The story has been updated with commentary from New Street Research on why Charter would not want to acquire GCI along with the rest of Liberty Broadband.
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