Everyone knew it was coming, and this week Charter officially inked a deal to acquire its largest shareholder Liberty Broadband in an all-stock agreement that buys Liberty’s 26% stake at a 5.2% discount to Class C shares’ last closing price. In addition, Charter will take on roughly $2.6 billion in debt. The deal should greatly simplify the lives of Charter executives because the company’s dual-class share structure essentially granted Liberty Chairman John Malone 48% voting power, with Liberty CEO Greg Maffei’s additional 4% creating a 52% majority voting block. So Charter’s move to buy back the Liberty shares will grant Charter execs a new level of strategic freedom, although all evidence points to a relatively collaborative relationship over the years with Malone and Maffei. In many ways, an amicable divorce has been underway for months: In April, Malone stepped down from his Chairman Emeritus role at Charter out of an abundance of caution related to the Clayton Act, which prohibits interlocking directorates among competing companies. And reports have suggested a long conversation about how to unravel the Liberty stake, including the revelation this week that Charter will not acquire Liberty’s GCI cable operation in Alaska. Instead, GCI will spin off into its own publicly traded company, news that comes the same week GCI said it will ditch its legacy linear TV service to go all-broadband.
Next? The Charter-Liberty deal is about simplification – both for Charter and for Malone’s media empire. And it’s part of a larger restructuring of Malone’s Liberty-branded assets in which Maffei will ride off into the sunset after nearly two decades at Malone’s side as Malone manages a more streamlined portfolio that includes a large Warner Bros. Discovery stake through the separate Liberty Media. This week Liberty Media announced it would spin off live entertainment assets Live Nation Entertainment and Quint into the new Liberty Live, with Liberty Media retaining the Formula One and MotoGP assets. Outside Liberty Media, Malone personally owns a 1.6% stake in Warner Bros. Discovery, as well as a board seat, so if anything the Charter deal should give him more time to focus on that investment. In the end, Malone is a legend who will turn 84 in March and shows no signs of slowing down despite a more manageable portfolio. He will no doubt continue to throw his weight around at WBD and through his other ventures. But that influence will no longer extend to Charter going forward as the company charts a new course centered on the bundling of broadband and wireless with its video assets, which now include more than $80/mo in free streaming value through its recent carriage agreements with AMC Networks, Disney, NBCUniversal, Paramount Global, TelevisaUnivision, and WBD. Malone no doubt already supported that strategy as it unfolded over the last year, but his willingness to officially step back gives Charter CEO Chris Winfrey and his team a chance to fully realize their vision. We’re looking forward to the results.
