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SEC Filings

PREM14A
CHARTER COMMUNICATIONS, INC. /MO/ filed this Form PREM14A on 06/26/2015
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Discounted Cash Flow Analysis

Allen & Company, Citi and Morgan Stanley performed a discounted cash flow analysis of Charter in which such TWC financial advisors calculated the estimated present value of the standalone unlevered after-tax free cash flows that Charter was forecasted to generate during the nine-month period ending December 31, 2015 through the full calendar year ending December 31, 2019. Financial data of Charter was based on the Charter forecasts. For purposes of this analysis, stock-based compensation was treated as a cash expense. The terminal value of Charter at the end of the forecast period was estimated by using perpetuity growth rates ranging from 1.25% to 1.5%. The cash flows and terminal values were then discounted to present value (as of March 31, 2015) using discount rates ranging from 6.25% to 7.25%. This analysis indicated the following approximate implied per share equity value reference range for Charter Class A common stock as compared to the closing price of Charter Class A common stock on May 22, 2015:

 

Charter Implied Per Share Equity

Value Reference Range

  

Charter Closing Stock Price

$174 – $244    $175.33

Other Factors. Allen & Company, Citi and Morgan Stanley observed certain additional factors that were not considered part of their joint financial analyses with respect to their respective opinions but were referenced for informational purposes, including, among other things, the following:

 

    latest 12 months (as of May 22, 2015) trading prices for TWC common stock, which ranged from approximately $129 to $172 per share, as compared to the implied merger consideration of $194.84 and the closing price of TWC common stock of $171.18 per share on May 22, 2015;

 

    latest 12 months (as of May 22, 2015) trading prices for Charter Class A common stock, which ranged from approximately $138 to $199 per share, as compared to the closing price of Charter Class A common stock of $175.33 per share on May 22, 2015;

 

    historical trading prices for TWC common stock and Charter Class A common stock from January 1, 2013 to May 22, 2015, as compared to the historical trading prices of Comcast Corporation’s Class A common stock and the Standard & Poor’s 500 index, which indicated that trading prices for TWC common stock, Charter Class A common stock and Comcast Corporation’s Class A common stock and the Standard & Poor’s 500 index increased by approximately 76%, 130%, 55% and 49%, respectively, over such period, and historical relative trading prices for TWC common stock and Charter Class A common stock from March 30, 2015 to May 22, 2015, which indicated that trading prices for TWC common stock increased by approximately 14.7% and Charter Class A common stock decreased by approximately 4.4% over such period;

 

    historical exchange ratios for TWC common stock and Charter Class A common stock from January 1, 2013 to May 22, 2015, which indicated an implied exchange ratio as of May 22, 2015 of approximately 0.98x and three-month, six-month and one-year (as of May 22, 2015) average exchange ratios of approximately 0.98x, 0.87x and 0.90x, respectively, as compared to an illustrative implied exchange ratio of approximately 1.106x assuming an all-stock transaction consideration;

 

    publicly available stock price targets of selected research analysts for TWC common stock and Charter Class A common stock, which indicated standalone stock price targets of such research analysts for TWC common stock of $138 to $180 per share (with a mean of $157 per share and a median of $150 per share), acquisition stock price targets of such research analysts for TWC common stock of $166 to $193 per share (with a mean of $177 per share and a median of $175 per share), with one research analyst estimating a year-end pro forma value package of $198 per share assuming a combination with Charter based on a $175 per share aggregate merger consideration value of which approximately 60% would be payable in cash, standalone stock price targets of such research analysts for Charter Class A common stock of $148 to $205 per share (with a mean of $177 per share and a median of $174 per share) and M&A-affected stock price targets of such research analysts for Charter Class A common stock of $186 to $230 per share (with a mean of $207 per share and a median of $210 per share); and

 

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