Tom Gannam/Associated PressService trucks at a Charter Communications facility in St. Louis.8:49 a.m. | Updated
Liberty Media agreed on Tuesday to buy a 27.3 percent stake in the cable services provider Charter Communications for $2.6 billion, in the latest deal by the billionaire John C. Malone.
Under the terms of the agreement, Liberty will pay what amounts to $95.50 a share for the stake, which is made up of 26.9 million shares and 1.1 million warrants. That represents a 6 percent premium to Charter’s closing price on Friday, the last day before reports of the pending investment began to emerge.
The transaction will give Liberty a significant stake in one of the country’s four biggest cable television operators, something Mr. Malone has not owned in over a decade. Charter reported about 4 million video customers and 3.8 million residential Internet customers as of Dec. 31.
“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,” Mr. Malone said in a statement.
Mr. Malone, who has built his career on deals, is on something of a hot streak. Last month, his Liberty International agreed to buy Virgin Media for about $16 billion, giving him a prominent position in the European cable TV market.
Though Mr. Malone is perhaps best known for his investment in DirecTV these days, he forged his career and fortune as the longtime chief executive of TCI, one of the country’s biggest cable services providers, until its sale to AT&T in 1999.
For the investors selling the stake in Charter – Apollo Global Management, Oaktree Capital Management and Crestview Partners – the Liberty investment will allow them to pare back the holdings they gained after taking control of the cable operator in 2009.
The investment firms became the principle owners of Charter as part of a deal to let the company emerge from bankruptcy. Charter had filed for Chapter 11 protection after amassing over $21 billion in debt.
“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,” Eric L. Zinterhofer, Charter’s chairman, said in a statement.
As part of the deal, Liberty will name four directors to Charter’s board, including Mr. Malone and his top lieutenant, Gregory B. Maffei. Liberty also agreed to cap its potential ownership stake in Charter at 35 percent until January 2016, and 39.99 percent afterward.
The deal, which will be financed with cash on hand and new loans, is expected to close in April or May.
Liberty was advised by LionTree Advisors and the law firm Baker Botts. Charter was counseled by the law firm Kirkland & Ellis.
Apollo was advised by Citigroup and the law firm Wachtell, Lipton, Rosen & Katz, while Oaktree was advised by Citigroup, Goldman Sachs and the law firm Paul, Weiss, Rifkind, Wharton & Garrison. Crestview was counseled by Davis Polk & Wardwell.
