Deal Description: On March 31, 2015, Liberty Broadband Corporation ("Liberty") entered into a new stockholders agreement with Charter Communications, Inc. ("Charter"), a subsidiary of Charter ("New Charter") and Advance/Newhouse Partnership ("A/N") and agreed to purchase $700 million of newly issued shares of New Charter Class A common stock in support of the transactions described below. In connection with the previously announced transactions between Charter and Comcast Corp., it is expected that Charter will undergo a corporate reorganization, resulting in New Charter becoming the new publicly traded parent company of Charter.
Liberty’s entry into the new stockholders agreement comes as the result of Charter’s announcement of a proposed transaction with A/N, whereby New Charter will acquire Bright House Networks ("Bright House") from A/N for $10.4 billion. The consideration to be paid to A/N will include shares of exchangeable common and convertible preferred units in the partnership through which the Bright House business will be conducted, as well as $2 billion in cash. Such units will be exchangeable for common shares of New Charter. The closing of the Bright House transaction (the "closing") is subject to several conditions. The new stockholders agreement will become effective upon the closing, at which time Liberty’s current stockholders agreement with Charter will terminate.
Upon the closing, Liberty (which is currently Charter’s largest stockholder) has also agreed to purchase $700 million of newly issued shares of New Charter Class A common stock at a price of $173.00 per share. The new stockholders agreement also provides that, upon the closing, Liberty will have the right to purchase an additional number of New Charter shares such that Liberty will own at the closing of the Bright House acquisition at least a 19.01% equity interest. Following the closing, and pursuant to a proxy agreement to be entered into between A/N and Liberty, A/N will grant Liberty a five-year proxy to vote shares of New Charter held by A/N, capped at 6%, which will enable Liberty to have total voting power in New Charter of 25.01%.
New Charter’s board of directors will consist of 13 directors upon the closing, with three directors to be designated by Liberty and three directors to be designated by A/N. The new stockholders agreement provides for certain caps on Liberty’s and A/N’s respective equity and voting interests and also provides for restrictions on transfers and additional governance matters. Liberty and A/N will have certain preemptive rights and will also be required to participate in New Charter’s stock buyback programs should their ownership interests exceed certain thresholds.
The firm represented Liberty in the transaction.
Target: The deal, which is indicative of the increasing consolidation in the cable industry, will create the second-largest cable company in the nation if approved.
Outside Counsel to Liberty Broadband: Baker Botts L.L.P.
In-House Counsel to Liberty Broadband: Liberty Broadband Senior Vice President and General Counsel Richard Baer and Deputy General Counsel Craig Troyer
Outside Counsel to Charter Communications: Wachtell, Lipton, Rosen & Katz
Inside Counsel to Charter Communications: Executive Vice President and General Counsel Richard Dykhouse
Outside Counsel to Bright House Networks: Sabin, Bermant & Gould LLP and Sullivan & Cromwell LLP
Value: $10.4 billion transaction value; $700 million of newly issued New Charter shares
Baker Botts Lawyers/Office Involved:The Baker Botts team (all in New York unless otherwise noted)
- Corporate: Buzz McGrath, Renee Wilm, Bob Murray, Kate Jewel
- Tax: Tamar Stanley (Washington), Scott Langley
For more information, please see Charter Communications’ news release by clicking here.
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