Charter Communications has announced its plan to acquire Cox Communications in a significant $34.5 billion transaction, including debt. This merger marks a pivotal move in the U.S. telecommunications sector. The deal involves $4 billion in cash, $6 billion in convertible preferred units at a 6.875% yield, and approximately 34 million Charter shares, giving Cox shareholders a 23% stake in the new entity, Reuters reported.
Post-acquisition, the company will continue under the Cox Communications name, while maintaining Charter's Spectrum branding for customer-facing services. Chief Executive Officer Chris Winfrey of Charter will lead the joint company, with Alex Taylor of Cox stepping in as chairman. This merger unites Charter's 32 million customers across 41 states with Cox's 6.5 million subscribers in various regions from California to Virginia, according to AP News.
Anticipated to deliver $500 million in annual cost savings within three years, the merger is projected to yield an 8% after-tax return on investment. This surpasses Charter's cost of capital, which is 7.5%, based on analyst estimates. Regulatory approval is still required, and given its scale, the deal may face antitrust examination, as similar mergers have encountered in the past. Additionally, Cox Enterprises, owning 23% of the merged entity, will replace Liberty Media as the provider of capital for Charter, a detail noted by the Financial Times.
