Charter Communications Inc. agreed to buy a majority stake of billionaire Si Newhouse Jr.’s Bright House Networks, for $10.4 billion, expanding its footprint in states including California, Florida and Michigan.
Charter will pay Advance/Newhouse common and convertible preferred stock and $2 billion in cash for the 73.7 percent stake, Stamford, Connecticut-based Charter said in a statement Tuesday. Its stock and bonds rose after the deal was announced.
“Scale has always been important in this industry, especially as a way to get good deals on content, which is the single biggest cost driver for these companies,” said Jan Dawson, an analyst with Jackdaw Research, based in Provo, Utah. “Given the scale benefits, it’s natural that they want to combine.”
Bright House, the sixth-largest U.S. cable company with about 2.5 million cable subscribers, is a consolation prize for Charter after it lost out to Comcast Corp. last year in an effort to buy Time Warner Cable Inc. Comcast’s $45.2 billion purchase of Time Warner Cable is pending regulatory approval.
In the wake of that transaction, Charter agreed last April to take control of 3.9 million Comcast cable-TV customers as a way to ease the approval process for the Comcast-Time Warner Cable deal.
Kim Hart, a Federal Communications Commission spokeswoman, declined to comment.
Charter’s purchase of Syracuse, New York-based Bright House depends on conditions, including shareholder and regulatory approval, Time Warner Cable’s right of first offer for Bright House and the close of Charter’s transactions with Comcast.
“If this deal goes through, it will work out well for Charter, giving it more revenue and muscle to compete,” said Roger Entner, an analyst with Recon Analytics LLC in Dedham, Massachusetts.
Shares of Charter rose 5.3 percent to $193.11 at the close in New York.
Charter’s $2 billion of 5.75 percent notes due in December 2024 rose 1.125 cents to 103.25 cents on the dollar at 11:54 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt was sold in October at par.
Bright House is owned by Newhouse’s Advance Publications Inc., which also controls Conde Nast Publications and the Golf Digest.
--With assistance from Sridhar Natarajan in New York and Todd Shields in Washington.