John Malone revives cable interest as Liberty acquires 27.3% of Charter for $2.6 bn

MUMBAI: US billionaire John Malone‘s Liberty Media Corporation has acquired 27.3 per cent stake in Charter Communications, the fourth largest cable provider in the US, for approximately $2.6 billion.

The company has entered into a definitive agreement with investment funds managed by, or affiliated with, Apollo Management, Oaktree Capital Management and Crestview Partners to acquire approximately 26.9 million shares and approximately 1.1 million warrants in Charter Communications.

“We are excited to make this investment in Charter, the fourth largest cable provider in the US,” said Liberty President and CEO Greg Maffei. “Tom Rutledge and his team have done an impressive job of turning around Charter’s operations and improving its financial position. We look forward to working with Charter’s management team and fellow board members in the future.”

“We are pleased with Charter’s market position and growth opportunities and believe that the company’s investments in its high-capacity digital network which provides digital HD and on demand television, high-speed data and voice, will benefit its customers and shareholders alike,” said Liberty Chairman John Malone.

“This transaction reflects a solid endorsement of the strategy that Tom Rutledge and his team are implementing at Charter,” said Charter Chairman Eric Zinterhofer. “Apollo, Oaktree, and Crestview have created substantial value for Charter and its shareholders, and on behalf of Charter’s board, we look forward to working with Liberty Media in creating further value.”

The transaction is expected to close in the first half of the second quarter of 2013, subject to the satisfaction of customary closing conditions, including expiration of the waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Upon closing, funds managed by Crestview and Oaktree will hold approximately 7.4 per cent and 2.2 per cent respectively of Charter’s common shares. Charter’s board of directors appointed a special committee of independent and disinterested directors to consider the transaction on behalf of the company.

In addition, Liberty Media agreed to, among other things, not increase its beneficial ownership in Charter above 35 per cent until January 2016 and 39.99 per cent thereafter.

Liberty also agreed not to engage in proxy solicitations for nominations to Charter’s board of directors through the 2015 shareholder meeting and continue to so refrain as long as its designees are nominated to the Charter board or the agreement is earlier terminated.

Charter entered into a stockholders agreement that among other things provides Liberty Media the right to designate up to four directors for appointment to the Charter board upon the closing of the transaction.

Liberty Media expects to designate John Malone, Chairman of Liberty Media; Gregory Maffei, President and CEO of Liberty Media; Nair Balan, EVP and CTO of Liberty Global; and Michael Huseby, CFO of Barnes & Noble.

Charter’s board of directors will appoint these directors subject to its normal review of director qualifications, and upon the resignation of Stan Parker, Darren Glatt, Bruce Karsh and Edgar Lee in connection with the closing of the transaction, which is expected to occur sometime after Charter’s 2013 annual meeting of stockholders.

Jeffrey Marcus, a partner at Crestview, will remain on the board.

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