Charter Communications Inc said it would buy Bright House Networks in a $10.4 billion deal as it seeks to expand its cable network after losing out to Comcast Corp in a fight for Time Warner Cable Inc
last year. The cable industry has been rapidly consolidating in recent years in a bid to counter the growing popularity of satellite TV and Web-based entrants such as Netflix Inc.
Comcast's $45.2 billion offer for Time Warner Cable, if approved, will cement its No 1 position in the industry and reshape the country's pay TV and broadband markets. With Charter looking to close its gap with Comcast, the Bright House deal could be the first in a series of acquisitions. Analysts have cited cable TV providers Mediacom and Suddenlink as potential takeover targets for Charter.
Charter's shares rose as much as 8.5 percent on Tuesday.
The company said it would pay Advance Newhouse - the owner of Bright House - $2 billion in cash and the rest in common and convertible preferred units of a newly created partnership created for the deal.
The deal will help Charter expand in Florida, a market where Bright House has a strong presence. Charter's key markets include Alabama, Georgia, Michigan and California.
Liberty Broadband Corp, Charter's largest shareholder with a 26.1 percent stake, said it would buy $700 million of newly issued shares of Charter.
Following the deal, Advance Newhouse would likely own 26.3 percent in Charter and Liberty Broadband's equity ownership would slip to 19.4 percent.
Charter's deal for Bright House is contingent on the expiration of Time Warner Cable's "right of first offer" for Bright House, the companies said. Bright House has an operating agreement in place with Time Warner Cable that allows it to share technology and programming rates with the larger cable operator.
Charter Chief Executive Tom Rutledge has known the Newhouse family for over two decades and managed cable systems that were part of the partnership with Time Warner Cable before Bright House Networks was formed.
Goldman Sachs and LionTree Advisors are financial advisers to Charter and UBS Investment Bank is adviser to Advance Newhouse.
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