Charter closes Cox deal, sees potential for $1B in annual synergies

M&A · Partnership

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Summary · why it matters

Charter Communications has completed its $34.5 billion acquisition of Cox Communications, expanding its Spectrum footprint to 45 states and creating a larger broadband, video, and mobile operator. The transaction, announced on Thursday, brings Cox’s operations into Charter’s network and gives the company additional opportunities to expand its product offerings and customer relationships. Spectrum plans to roll out its full suite of products, including its pricing and packaging, across former Cox markets in mid-September, and Cox internet customers who do not already use Cox Mobile will receive a year of free mobile service. On Charter’s second-quarter earnings call, CEO Chris Winfrey said the company continues to expect at least $800 million of annual run-rate transaction expense synergies from the Cox combination, while suggesting the figure could ultimately reach $1 billion. Charter has also set a post-transaction leverage target of 3.5 times, which it expects to reach within three years following the Cox and Liberty Broadband transactions. The transaction leaves about $12 billion of Cox debt and finance leases at Charter subsidiaries, while Cox Enterprises received Charter securities and cash and now holds about 26% of the combined company on a fully diluted, as-converted basis. Charter will continue to operate its services under the Spectrum name, although the parent company plans to adopt the Cox Communications name within a year. Shares were up about 3% in afternoon trade on Friday.