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In a year of fallow for fuses and initial public offers, it is appropriate that the largest transaction of the year in the United States is a combination of both. On Friday, Charter communications backed by John Malone announced that he would acquire smaller payment TV and Broadband rival Cox Communications for $ 34.5 billion, including net debt.
Cox is private by a family of the same name, with an empire that also includes local television networks and automotive commercial publications. From the purchase of capital of $ 22 billion, only $ 4 billion comes in cash with the rest in the form of Charter shares. The family will now have a quarter of the listed letter, which after the link will have a business value of almost $ 200 billion and 38 million customers that extend in the United States.
This is far from the letter that was declared in bankruptcy 16 years ago. Liberty Media, controlled by “cable cowboy” Malone, assumed a participation in 2013. Since then, Charter has changed his emphasis on broadband Internet and lately on the Internet on mobile devices.
As the merger market slowly defrosts, it makes sense that logical and well -trained mergers such as this would happen first. For a long time it has been clear that the United States cable television industry is converging in a duopoly between Charter and Comcast. In volatile markets, it helps to have a seller prepared to accept actions instead of cash. The Cox clan, when taking stock, sharing any Snapback Future Snapback.
At an industry conference on Thursday, Charter’s executive director Chris Winfrey said he weighed the acquisitions against the alternative of repurchase the company’s actions. That is shown in the fact that Charter has valued Cox at 6.4 times the estimated EBITDA for this year, the same multiple in which the carter is quoted. Factoring in the $ 500 million of expected cost savings, which falls to 5.9 times.
This should be a relief for shareholders who were chopped by the acquisition of Charter of $ 79 billion of Time Warner Cable a decade ago, which arrived at nine times Ebitda. And Winfrey could use a good will of investors: the actions of the letter have almost been reduced by half since 2021, pressured by broadband subscribers, competition on mobile devices and a payment TV business already demolished for transmission services such as Netflix.
The Cox family is not as dependent as other shareholders in the recovery of Charter’s valuation: it has also taken $ 6 billion of favorite values that become shares at a price 35 percent above where the letter is today. Until then, preferred actions pay an annual dividend of 7 percent.
The result is similar to the family to finally have publicly made its paid television company, but with some insurance against the marketing markets. It is the final touch in a transaction that seems to have been carefully designed to adapt to foreign times. Even so, making any kind of treatment this year feels like an achievement.