Charter, Cox Communications to combine companies

Charter (CHTR) and Cox Communications announced that they have entered into a definitive agreement to combine their businesses in a transaction. The proposed transaction values Cox Communications at an enterprise value of approximately $34.5B based on, and at parity with, Charter’s recent enterprise value to 2025 estimated adjusted EBITDA trading multiple. In the transaction, Charter will acquire Cox Communications’ commercial fiber and managed IT and cloud businesses, and Cox Enterprises will contribute Cox Communications’ residential cable business to Charter Holdings, an existing subsidiary partnership of Charter. Cox’s assets have been valued using Cox’s 2025 estimated Adjusted EBITDA, multiplied by Charter’s total enterprise value to 2025 estimated Adjusted EBITDA trading multiple of 6.44x, based on: Wall Street consensus for Charter’s 2025 adjusted EBITDA, and Charter’s 60-day Volume Weighted Average Price of $353.64, as of April 25. As consideration in the transaction, Cox Enterprises will receive: $4B in cash, $6B notional amount of convertible preferred units in Charter’s existing partnership, which pay a 6.875% coupon, and which are convertible into Charter partnership units, which are then exchangeable for Charter common shares, and Approximately 33.6M common units in Charter’s existing partnership, with an implied value of $11.9B, and which are exchangeable for Charter common shares. Based on Charter’s share count as of March 31, at the closing, Cox Enterprises will own approximately 23% of the combined entity’s fully diluted shares outstanding, on an as-converted, as-exchanged basis, and pro forma for the closing of the Liberty Broadband merger. The transaction is subject to customary closing conditions, including the receipt of regulatory and Charter shareholder approvals. The combined entity will assume Cox’s approximately $12B in outstanding debt. Within a year after the closing, the combined company will change its name to Cox Communications. Spectrum will become the consumer-facing brand within the communities Cox serves. The combined company will remain headquartered in Stamford, Connecticut, and will maintain a significant presence on Cox’s Atlanta, Georgia campus following the closing.