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PREM14A
CHARTER COMMUNICATIONS, INC. /MO/ filed this Form PREM14A on 06/26/2015
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UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited pro forma financial statements as of and for the three months ended March 31, 2015 and for the year ended December 31, 2014 are intended to reflect the impacts of the TWC transactions, the BHN transactions and the Liberty transactions on Charter’s consolidated financial statements as if the TWC transactions, BHN transactions and Liberty transactions had occurred as of March 31, 2015 for the unaudited pro forma consolidated balance sheet and as of January 1, 2014 for the unaudited pro forma consolidated statements of operations. The accompanying unaudited pro forma financial statements present the pro forma consolidated financial position and results of operations of Charter based on the historical financial statements and accounting records of Charter, TWC and Bright House and the related pro forma adjustments as described in the accompanying notes. The pro forma adjustments are included only to the extent they are (i) directly attributable to the TWC transactions, the BHN transactions and/or the Liberty transactions, (ii) factually supportable and (iii) with respect to the statements of operations, expected to have a continuing impact on the combined results.

TWC Transactions

In the TWC transactions, TWC stockholders, excluding Liberty Broadband and Liberty Interactive subject to the terms of the Liberty contribution agreement, will have the right to elect to receive either $100 in cash and shares of New Charter Class A common stock equivalent to 0.5409 shares of Charter Class A common stock for each share of TWC common stock outstanding (the “Option A Election”) or $115 in cash and shares of New Charter Class A common stock equivalent to 0.4562 shares of Charter Class A common stock (the “Option B Election”). The unaudited pro forma financial statements provided herein assume all of the TWC stockholders elect the Option A Election. Liberty Broadband and Liberty Interactive will not receive cash as part of the TWC transactions, but will have the right to receive shares of New Charter equivalent to 1.106 shares of Charter for each TWC share of TWC common stock owned by them. For purposes of these unaudited pro forma financial statements, the TWC preliminary purchase price is assumed to be $56.4 billion. Based on a per share price of $179.15, the closing share price of Charter’s Class A common stock on June 1, 2015, and 282.8 million shares of TWC common stock outstanding as of June 1, 2015, Charter expects to issue shares of New Charter Class A common stock equivalent to 157.4 million shares of Charter Class A common stock valued at approximately $28.2 billion. Additionally, Charter expects to pay $27.5 billion in cash to TWC stockholders, which is expected to be financed with cash on hand from TWC, new indebtedness of New Charter and the issuance of equity to Liberty Broadband pursuant to the Liberty transactions. The preliminary purchase price also includes New Charter equity replacement awards with an estimated pre-combination vesting period fair value of $607 million that will be issued in respect of equity awards held by employees of TWC and $118 million that will be paid in cash to TWC former employees and non-employee directors who hold equity awards, whether vested or not vested. The fair value of the equity portion of the TWC transactions consideration for accounting purposes will be based on the fair value of Charter’s Class A common stock at the date of close and will be different from the assumed value presented in these unaudited pro forma financial statements. A 5% change in the per share price of Charter Class A common stock will result in a $1.4 billion change in the fair value of the equity issued and total consideration for accounting purposes. In addition, the amount of equity and cash consideration will vary based on the number of TWC stockholders that elect the Option B Election and receive $115 in cash and shares of New Charter Class A common stock equivalent to 0.4562 shares of Charter. A 5% decrease in the number of shares held by TWC stockholders electing the Option A Election, who instead elect the Option B Election, will result in a $209 million reduction in the fair value of equity issued and a $206 million increase in debt.

The actual number of shares of New Charter Class A common stock that TWC stockholders, excluding Liberty Broadband and Liberty Interactive, will be entitled to receive will be calculated by multiplying the exchange ratios of 0.5409 or 0.4562 specified above by 0.9042 (the Parent Merger Exchange Ratio), which will also be the exchange ratio that will be used to determine the number of shares of New Charter Class A common stock that Charter stockholders will be entitled to receive per share of Charter Class A common stock. Such exchange ratio is not intended to impact the aggregate value represented by the shares of New Charter Class A common stock issued in the TWC transactions; however, it will impact the actual number of shares issued in the TWC transactions. Such impact is reflected in the weighted average common shares outstanding included in the accompanying unaudited pro forma consolidated statements of operations.

 

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