John Malone’s Liberty Broadband Seeks Merger With Charter

John Malone is angling to simplify his cable portfolio, with his Liberty Broadband looking to merge with Charter Communications — two companies he holds sizable interests in.

Shares of Liberty Broadband jumped 26% Tuesday on the news, which was issued after market close on Sept. 23, while Charter’s stock declined 2.5%.

Malone owns a 49% voting stake in Liberty Broadband, which holds a 26% interest in Charter and also owns Alaskan telecom company GCI. On Monday, Liberty Broadband announced a counterproposal to the special committee of the board of directors of Charter, in response to an initial merger proposal sent Sept. 15 by the special committee.

“Liberty’s proposed transaction would rationalize the dual corporate structure between Charter and Liberty Broadband, providing enhanced trading liquidity and removing Liberty Broadband’s existing governance rights,” Greg Maffei, Liberty Broadband president and CEO, said in a statement. “The certainty of a future transaction would provide clarity to our shareholders and continue our strong partnership with Charter in the interim.”

About GCI, Maffei added, “Charter would be acquiring an attractive business that is the leading connectivity platform in Alaska with significant opportunity for future value creation. We look forward to reaching a mutually agreed upon transaction for the benefit of all stakeholders.”

Malone also is a large shareholder in Warner Bros. Discovery — he was listed as beneficial owner of 19.1 million shares of the company as of April 2024 — and serves on WBD’s board. Last week, Warner Bros. Discovery announced that attorney Daniel Sanchez, who is Malone’s nephew and had previously served on the board of Discovery Inc., will join the WBD board effective Oct. 1, 2024. In addition, Malone serves as chairman of holding company Liberty Media and international cable operator Liberty Global.

Charter declined to comment on the proposed Liberty Broadband transaction.

In the Sept. 15 letter to Malone and Maffei, included in Liberty Broadband’s SEC filing, Charter president and CEO Chris Winfrey outlined the rationale for merging the two entities. “As you have highlighted to us, Liberty Broadband has historically traded at a discount to net asset value, in part as a result of its holding company structure. In that vein, we are pleased to provide this non-binding proposal with respect to a combination of Charter with Liberty Broadband in an all-stock transaction as described below,” Winfrey wrote. “We believe that this proposal represents a compelling opportunity for Liberty Broadband to simplify its structure and meaningfully reduce this discount, to provide greater value, certainty and ultimately greater liquidity to the Liberty Broadband shareholder.”

Under Charter’s initial proposed terms, Liberty Broadband shareholders would receive 0.228 newly issued shares of Charter common stock for each share of Liberty Broadband common stock. That exchange rate “assumes that Liberty Broadband disposes of GCI prior to completion of the transaction,” Winfrey’s letter said, but added, “Alternatively, we are willing to discuss terms for a transaction that would include GCI.”

In its counterproposal, Liberty Broadband outlined the terms of a proposed combination of Liberty Broadband with Charter in an all-stock transaction “intended to be tax-free.” Under the proposal, holders of each series of Liberty Broadband common stock would receive 0.2900 of a share of Charter Class A common stock in exchange for each share of Liberty Broadband common stock. The proposed transaction includes a closing date of June 30, 2027, or “such earlier date as the parties shall mutually agree.”

According to the terms of the counterproposal, Charter would assume or refinance Liberty Broadband’s debt “at or prior to closing” as well as Liberty Broadband’s outstanding preferred stock.

Pending the outcome of the merger talks, Liberty Broadband (including GCI) would “operate in the ordinary course of business,” according to Liberty Broadband. Among other things, the proposed transaction would be subject to the approval of a “majority of the stockholders of Liberty Broadband unaffiliated with John Malone and his affiliates.” It also would be subject to customary closing conditions, including requisite regulatory approvals and applicable tax opinions.