Charter Agrees to Combine With Cox in $34.5 Billion Deal

Charter Communications Inc. has agreed to combine with closely held Cox Communications in a cash-and-stock deal that would unite two of the biggest US cable providers.

Craig Moffet, Senior Research Analyst at Moffettnathonson breaks down what this means for the broadband giants.

The takeover values Cox at about $34.5 billion including debt, the companies said in a statement Friday, confirming an earlier Bloomberg News report. The deal includes about $12.6 billion of net debt and $21.9 billion in equity, the companies said.

The combined company would be the top broadband operator in the US, and increase Charter’s subscriber base by more than 20%, according to Bloomberg Intelligence analyst Geetha Ranganathan. It also comes at a time when cable companies are facing increasing competition.

Wireless providers, such as AT&T Inc. and T-Mobile US Inc., are luring away broadband customers with their own internet offerings. At the same time, streaming companies such as Netflix Inc. have upended the traditional business of pay-TV.

The Cox family will be the largest shareholder in the combined company, with a stake of about 23%, and will have seats on the board. Within a year of closing, the combined company will also change its name to Cox Communications.

Charter shares gained 2.4% to $429.67 as the market opened in New York on Friday. They have risen about 24% this year, giving the company a market value of roughly $66 billion.

Billionaire John Malone — chairman of Liberty Broadband, Charter’s largest shareholder — fueled M&A expectations when he said that the company should be allowed to merge with a media or telecom rival to stay competitive. Speaking at Liberty Media’s investor day in New York in November, he named Cox among a number of possible merger candidates. Charter and Cox previously discussed a potential deal more than a decade ago.

“This combination will augment our ability to innovate and provide high-quality, competitively priced products, delivered with outstanding customer service, to millions of homes and businesses,” Chris Winfrey, president and CEO of Charter, said in the statement.

Malone’s Liberty Broadband will cease its direct shareholding after the deal closes, and its directors will resign from the board.

Turf War

Cable companies like Charter, the largest pay-TV provider, rely on three main lines of business for their revenue: video service, internet access and wireless phone service. Subscribers to two of those businesses, video and broadband, are shrinking.

Cable providers have been selling their own mobile phone plans by leasing network access from major carriers. At the same time, phone carriers have been poaching home internet subscribers from cable companies.

The bet is that customers will in the future prefer to buy their internet and mobile phone services from the same provider — a trend referred to as convergence. A combination of Charter and Cox would position them to better compete in that environment by allowing them to bundle offerings and more efficiently invest in infrastructure.

“Charter is aggressively marketing its converged mobile fixed bundles at competitive rates to improve subscriber acquisition and retention,” according to Bloomberg Intelligence analysts. “Regardless, the entire cable sector is being hurt by intensifying telecom competition from both fiber coverage and fixed wireless access.”

--------

Watch Bloomberg Radio LIVE on YouTube

Weekdays 7am-6pm ET

Follow us on X

Subscribe to our Podcasts:

Bloomberg Daybreak

Bloomberg Surveillance

Bloomberg Intelligence

Balance of Power

Bloomberg Businessweek

Listen on Apple CarPlay and Android Auto with the Bloomberg Business app:

Apple CarPlay

Android Auto

Visit our YouTube channels:

Bloomberg Podcasts

Bloomberg Television

Bloomberg Originals