JSI Capital Advisors - The Monitor

U.S. cable provider Charter Communications (NASDAQ:CHTR) announced on Tuesday, March 31^st that it had acquired Bright House Networks, in a deal worth approximately $10.4 billion. The transaction will result in Charter owning over 80 percent of Bright House Networks once the deal closes. The transaction increases Charter’s footprint in the U.S. and helps it compete against other large cable providers.

Valuation Analysis and Deal Metrics

Transaction Facts

Charter Communications announced on May 26, 2015 that is was acquiring cable competitor, Bright House Networks for approximately $10.4 billion.
Charter will finance the transaction through approximately $2.0 billion in cash, $2.5 billion of convertible preferred partnership units, and $5.9 billion of common partnership units.
In the deal, Charter will own approximately 86-87% of Bright House and Advance/Newhouse (a parent of Bright House) will own the remaining 13-14%.
Expected to close by the end of 2015.

Strategic Considerations

Transaction further increases Charter’s footprint across the United States.
Increases competition in the already competitive cable industry.
Bright House is the largest cable operator in Tampa and Orlando, Florida.
Gives Charter the ability to leverage its operating structure and platform investments.

JSICA's Take

Charter-BHN transaction, when compared to some of the priced transactions in this industry since the beginning of 2012, comes in significantly lower multiples.
Based off of the average EV/LTM Revenue for priced transactions since 2012, Charter paid 0.5x lower in this transaction.
Based off of the average EV/LTM OIBDA for priced transactions since 2012, Charter paid 1.1x lower in this transaction.