Charter reaches all-stock deal to buy Liberty Broadband

Charter Communications said Wednesday it has agreed to buy Liberty Broadband in an all-stock transaction, a deal that matters for investors because Liberty’s value is closely tied to its Charter holdings. Instead of cash, Liberty shareholders will receive Charter shares, so the final value they get will move with Charter’s stock price.

Under the agreement, holders of each class of Liberty Broadband stock will receive 0.236 of a Charter share for every Liberty share they own, Charter said. That figure is the exchange ratio, meaning it sets how much of the buyer’s stock each target-company share converts into when the deal closes.

The agreed ratio is higher than Charter’s earlier proposal of 0.228 Charter share per Liberty share. It is lower than Liberty Broadband’s counterproposal of 0.29 Charter share per Liberty share.

Using Tuesday’s closing prices, the 0.236 exchange ratio valued Liberty Broadband at $92.51 a share. That represented a 5.2% discount to the closing price of Liberty’s Class C shares.

What shareholders are being offered

Because this is an all-stock transaction, Liberty investors are not being offered a fixed cash price. They are being offered a set slice of Charter stock for each Liberty share. If Charter’s share price changes before the deal is completed, the market value of the consideration changes too.

The agreement covers each class of Liberty Broadband shares, including the company’s Class A, Class C and preferred shares, according to Charter’s announcement.

Liberty Broadband’s main assets include 45.6 million common shares of Charter and GCI, LLC, which Charter described as Alaska’s largest communications provider. After the transaction closes, Charter said it expects to retire those Liberty-held Charter shares and issue 34 million shares to Liberty shareholders.

Timing and stated rationale

Charter said the transaction is currently expected to close on June 30, 2027. The company did not say in the announcement that the closing date was immediate, which means investors still have a long period in which Charter’s share price, Liberty’s trading price and deal expectations may move.

Liberty Chairman John Malone said the transaction would address the way Liberty Broadband trades relative to the value of its assets.

“Today’s announced transaction will rationalize Liberty Broadband’s trading discount and ultimately provide our shareholders with enhanced liquidity,” Malone said.

A trading discount refers to a situation where a company’s stock changes hands below the market value investors assign to its underlying assets. Enhanced liquidity means shareholders may have an easier time trading the resulting shares, in this case Charter stock, after the deal is completed.

This story draws on original reporting from MarketWatch.