NEW YORK — Who says the cable television industry is in its twilight years? With broadband internet services fueling continued profit-generation opportunities for Multichannel Video Programming Distributors (MVPDs) as “cord-cutting” trends continue, the “cable business” is vastly different than it was a decade ago.
For some companies, including Charter Communications, the services it offers have lasting consumer value. This could explain why it is agreeing to acquire Cox Communications in a multi-billion deal announced early Friday by the two companies.
A definitive agreement will combine the company’s respective businesses in what they call “a transformative transaction” with the aim of creating an industry leader in mobile and broadband communications services — and cable television packages, too.
How much is Stamford, Conn.-headquartered Charter paying for Cox?
The proposed transaction values Cox, which is not connected to radio and television station owner Cox Media Group, at an enterprise value of approximately $34.5 billion.
Terms call for $21.9 billion of equity and $12.6 billion of net debt and other obligations.
The value is based on, and at parity with, Charter’s recent enterprise value to 2025 estimated Adjusted EBITDA trading multiple.
BEHIND THE NUMBERS
In the transaction, Charter will acquire Cox Communications’ commercial fiber and managed IT and cloud businesses. 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:
- $4 billion in cash
- $6 billion 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
- Approximately 33.6 million common units in Charter’s existing partnership, with an implied value of $11.9 billion (This assumes 33.6 million common units are exchanged for 33.6 million Charter common shares, multiplied by Charter’s 60-day Volume Weighted Average Price of $353.64, as of April 25), and which are exchangeable for Charter common shares.
Based on Charter’s share count as of March 31, 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 $12 billion in outstanding debt.
CHARTER TO SUNSET ITS CORPORATE NAME
Within a year after the closing, the combined company will change its name to Cox Communications.
However, Spectrum will become the consumer-facing brand within the communities Cox serves, continuing the Charter MVPD brand.
The combined company will remain headquartered in Fairfield County, Conn., but will maintain a “significant presence” in Atlanta at Cox’s existing facilities following the consummation of the deal.
Charter President/CEO Chris Winfrey commented, “We’re honored that the Cox family has entrusted us with its impressive legacy and are excited by the opportunity to benefit from the terrific operating history and community leadership of Cox. Cox and Charter have been innovators in connectivity and entertainment services – with decades of work and hundreds of billions of dollars invested to build, upgrade, and expand our complementary regional networks to provide high-quality internet, video, voice and mobile services. This combination will augment our ability to innovate and provide high-quality, competitively priced products, delivered with outstanding customer service, to millions of homes and businesses. We will continue to deliver high-value products that save American families money, and we’ll onshore jobs from overseas to create new, good-paying careers for U.S. employees that come with great benefits, career training and advancement, and retirement and ownership opportunities.”
The Cox family is the longest continuous operator in the industry, having acquired its first cable television franchise in 1962; its roots are in Dayton, Ohio, while Cox Communications today is headquartered in Atlanta.
“Our family has always believed that investing for the long-term and staying committed to the best interests of our customers, employees and communities is the best recipe for success,” said Alex Taylor, Chairman and CEO of Cox Enterprises. “In Charter, we’ve found the right partner at the right time and in the right position to take this commitment to a higher level than ever before, delivering an incredible outcome for our customers, employees, suppliers and the local communities we serve.”
Eric Zinterhofer, Chairman of Charter’s Board of Directors and is the Founding Partner of investor Searchlight Capital Partners, the group that fueled the combination of Televisa with Univision Communications, commented, “Charter’s board and I are excited about this transaction and very supportive of Alex stepping into the board Chairman role. The combination of Cox Communications with Charter is an excellent outcome for our collective shareholders, customers, employees and the industry.”
As part of the transaction, Charter expects to assume approximately $12 billion of Cox Communications debt at closing and will have approximately 3.9x net leverage, including the impact of the Liberty Broadband and Cox transactions, based on the net debt of each company as of March 31, 2025. Charter expects to adjust at closing its long-term target leverage range to 3.50x – 4.00x to reflect the enhanced size of its balance sheet.
- 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.
