On May 23, 2015, Liberty Broadband Corporation (“Liberty”) entered into an agreement with Charter Communications, Inc. (“Charter”) to invest $4.3 billion in Charter at a price of $176.95 per share in connection with Charter’s proposed merger with Time Warner Cable, Inc. (“TWC”). The deal values TWC at $78.7 billion. Liberty (which is currently Charter’s largest stockholder) also reaffirmed its commitment to purchase $700 million at a price of $173 per share in connection with Charter’s proposed acquisition of Bright House Networks (“Bright House”) from Advance/Newhouse Partnership (“A/N”) for $10.4 billion. In connection with these transactions, it is expected that Charter will undergo a corporate reorganization, resulting in a current subsidiary of Charter becoming the publicly traded parent company (“New Charter”).
In support of the Charter-TWC merger, Liberty will purchase $4.3 billion of New Charter Class A Common Stock (the “New Charter Shares”) using the proceeds from $4.4 billion of subscriptions for newly issued shares of Liberty Series C Common Stock (the “Liberty Shares”) at a price of $56.23 per share. The purchasers of the Liberty Series C Common Stock include Liberty Interactive Corporation (“LIC”) through the Liberty Ventures Group and several third party investors, including Coatue Management LLC, JANA Partners LLC and Soroban Capital Partners LP. The subscriptions are on similar terms and subject to customary closing conditions and the completion of the Charter-TWC merger. Each of Charter and Liberty intend to seek stockholder approval for the issuance of the New Charter Shares and the Liberty Shares, respectively. If Liberty does not receive the requisite approval for the issuance of the Liberty Shares, the purchasers will instead acquire a limited number of Liberty Shares, together with shares of a newly issued series of non-convertible preferred stock of Liberty.
Also in connection with the Charter-TWC merger, Liberty entered into an agreement with Charter pursuant to which it has agreed to vote all of its shares of Charter’s Class A Common Stock in favor of the Charter-TWC merger and any related proposal, and an agreement with LIC that grants Liberty a proxy over shares of New Charter that LIC receives in the transaction. Liberty and LIC have also entered into an agreement with Charter which provides that Liberty and LIC will exchange, in a tax-free transaction, the shares of TWC common stock held by each company for shares of New Charter Class A common stock (subject to certain limitations).
Separately, Liberty reaffirmed its commitment to purchase up to $700 million in New Charter Class A Common Stock at a price per share of $173 in connection with the Bright House acquisition. The terms of a new stockholders agreement among Charter, New Charter, Liberty and Bright House remain substantially the same as previously announced, except that restrictions on Liberty’s ability to utilize shares of New Charter in connection with financing transactions have been eliminated, and Bright House will be entitled to designate two director nominees (reduced from three), among other things. A/N and Liberty will also enter into a proxy agreement to vote shares of New Charter held by A/N, capped at 7% of New Charter’s outstanding shares.
Following the Charter-TWC merger and the Bright House transaction, Liberty is expected to control approximately 25.01% of the aggregate voting power of New Charter, and is expected to be New Charter’s largest stockholder.
The firm represented Liberty in the transactions.
The Baker Botts team (all in New York unless otherwise noted): Corporate: Buzz McGrath, Renee Wilm, Jonathan Gordon, Kate Jewell, Brendan Dignan, Brittany Uthoff, Justin Blass; Tax: Tamar Stanley (Washington), Scott Langley, Peter Farrell (Washington).
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