Liberty Broadband Deal Gives Charter Flexibility; FCC OK Not Needed

Charter Communications' plans to buy Liberty Broadband should give it much more flexibility, rather than having to take into account what Liberty -- which is a blocking minority shareholder in Charter -- wants, Recon Analytics' Roger Entner told us in an email. Under the deal Charter announced Wednesday, it's buying Liberty Broadband's stake in Charter, while Liberty Broadband spins off GCI into an independent company.

Simultaneously, Liberty Broadband sister company Liberty Media said it's splitting off its Liberty Live Group, which includes Liberty's stake in Live Nation. Both Liberties are chaired by media mogul John Malone, with Greg Maffei as president-CEO. Maffei will step down as CEO by year's end, with Malone taking over CEO duties, said Liberty Media. The company's remaining assets include ownership of Formula One racing.

Liberty Broadband's GCI will be spun off into a publicly traded company. Charter said the Liberty Broadband deal is expected to close June 30, 2027, subject to completion of the GCI spinoff first. Charter isn't acquiring FCC-licensed assets due to the GCI spinoff, so FCC approval of the Liberty Broadband deal isn't needed, a person familiar with the deal told us. Asked about possible regulatory approval of the GCI spinoff, Liberty Broadband didn't comment.

Under the terms of the all-stock Liberty Broadband deal, shareholders will receive 0.236 of a share of Charter common stock for each share of Liberty common stock, and one share of Charter preferred stock for each share of Liberty preferred stock.

Liberty Broadband owns 26% of Charter, and the Charter/Liberty deal works out well for shareholders of both, as Charter is essentially buying back its shares for a roughly 8% discount and Liberty Broadband shares have traditionally traded at a discount to Charter, Entner said. Charter didn't want GCI, given the challenges of regulatory approval and then having to operate in Alaska. A spun-off GCI isn't a takeover target on its own, Entner added. Alaska isn't a growing market, and its geographic distance means there are few if any synergies to be had, he said.

Malone's 48% stake in Liberty Broadband and Maffei's 4% give them effective control of Liberty and a blocking minority share of Charter, Entner said. The new structure will mean Malone has around 12% of Charter.

In a statement, Malone said he plans to hold Charter shares after the deal closes.