Charter, Cox announce merger

Two of America’s largest cable companies, Charter Communications and Cox Communications, have announced they will merge.

The two companies, which are the second and third biggest cable companies in the country, respectively, will become known under the Cox name overall, while Charter’s Spectrum branding will be used for a variety of the combined company’s services, including cable, broadband and mobile phone plans. 

Cox currently uses the banner “Contour” for some of its video services only.

The deal values Cox, which is privately held, at approximately $34.5 billion when gauged in comparison to Charter.

Charter has around 31.4 million subscribers to its TV, broadband and phone services, while Cox’s count comes in at around 6 million. 

The country’s top cable provider, Comcast, which offers its TV, internet and mobile plans under the Xfinity branding, has around 31.6 million customers.

The deal is contingent on regulatory and stockholder approvals.

After closing, Charter CEO Chris Winfrey will continue to lead the combined company. Alex Taylor, chairman and CEO of Cox Enterprises, the parent of Cox Communications, will become board chairman. Eric Zinterhofer, who currently holds the chair position, will become the lead independent director. 

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Charter’s previously announced deal to acquire Liberty Broadband is scheduled to move up to close around the same time as the Charter-Cox deal. As part of the Liberty merger, the GCI unit will be spun off. 

Upon completion of the Cox deal, Liberty will no longer hold any shares in Charter directly and plans call for the three Liberty-nominated members on Charter’s board to resign. Liberty Broadband shareholders will receive direct interests in Charter as a result of the Liberty Broadband merger. 

After closing, the combined company will be based at Charter’s headquarters in Stamford, Connecticut, though it does plan to retain a “significant presence” at Cox’s Atlanta campus.

The deal is likely to cause a significant shift in the cable industry, with the potential for Cox to come out as the largest such operator in the U.S.

Once a dominant force in how consumers watched TV, cable companies have seen their video business shrink dramatically thanks to the so-called “cord cutter” phenomenon (which takes its name from the literal “cords” or cables the companies maintain for delivering signals to subscribers’ homes). 

The onslaught of streaming in recent years has further compounded this shift.

Many cable companies have diversified to provide broadband internet access, mobile and landline phone service, along with home security, automation and networking services, though many of these categories are facing increased competition. 

For example, mobile network owners have been steadily making upgrades to handle wireless home broadband services as well attempting to break into the business broadband space that remained a stronger point for legacy cable providers. Meanwhile, the security, networking and home automation spaces are cluttered.

Charter provides services to customers in California, Colorado, Florida, Georgia, Illinois, Indiana, Minnesota, Missouri, North Carolina, New York, Oregon and Texas, while Cox currently serves markets in Arizona, California, Kansas, Louisiana, Nebraska, Nevada, Ohio, Oklahoma and Virginia.

The combined company says it hopes to save around $500 million within three years after completing the merger through procurement and overhead savings.

As part of the transaction, Charter expects to assume approximately $12 billion of Cox Communications.

Citi and LionTree are serving as financial advisors and Wachtell, Lipton, Rosen & Katz is serving as legal counsel to Charter. Allen & Company is serving as financial advisor to Cox Enterprises. BDT & MSD Partners, Evercore and Wells Fargo are serving as financial advisors to Cox Communications. Latham & Watkins LLP is serving as the legal advisor to Cox Enterprises.

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