Liberty Broadband, GCI Liberty to Merge

(Image credit: Liberty Broadband)

Liberty Broadband and GCI Liberty, two investment vehicles of cable legend John Malone, have agreed to a merger that will combine Liberty Media’s two largest cable interests -- Charter Communications and Alaskan cable and telecom company GCI -- in a deal that hopefully will unlock value for both.

Liberty Broadband’s main asset is its 24.4% interest in Charter, a position it acquired in 2013. Analysts have long expected a combination of GCI and Liberty Broadband, mainly to unlock value.

Liberty Broadband began trading as a tracking stock on Nov. 5, 2014.  Its stock price has increased by about 203% in that time, compared to Charter, whose shares have risen 244% in the same time frame. GCI Liberty has been a different story.

Liberty Media subsidiary Liberty Interactive purchased GCI in April 2017 for $1.1 billion. The GCI asset was spun out of Liberty Interactive (now Qurate Retail Group) into another tracking stock (Liberty Ventures) and began trading as GCI Liberty (NASDAQ symbol: GLIB) in March 2018. The stock opened March 12, 2018 at $54.29 each and in the past two years has risen about 54%, closing at $83.62 per share on Aug. 7.

“This process was driven by independent special committees of Liberty Broadband and GCI Liberty, and John Malone and I fully endorse the combination,” Liberty Broadband and GCI Liberty CEO Greg Maffei said in a press release. “The transaction is financially attractive and beneficial for both companies.”

According to the deal terms, each holder of GCI Liberty shares will receive 0.588 shares of Liberty Broadband stock in exchange for their GCI shares. At the close of he deal, expected in the first half of 2021, former GCI Liberty shareholders will own 30.6% of the newly combined company. 

Aside from its Charter stocks, Liberty Broadband includes Boston-based location technology company Skyhook. GCI Liberty’s principal assets consist of GCI Holdings, and non-controlling interests in Liberty Broadband, Charter, and online lender LendingTree.

According to the companies, the combination will allow the two to save on overhead costs, simplify its management and administrative structure, reduce trading discounts to its equities, and improve flexibility for future acquisitions.

In addition, the merger will allow Liberty Broadband to take advantage of the lower pierced GCI Liberty equity, and gives it another attractive cable asset. GCI Liberty in turn gets a premium price for its stock, is tied to a more strategic equity, gets a more liquid currency in Liberty Broadband stock and gains access to a larger, more stable balance sheet.

Malone will continue to control 49% of the combined company’s vote. Liberty Broadband said the deal values GCI Liberty at $8.7 billion. Malone will remain chairman of Liberty Broadband and CEO Maffei also will retain his role in the combined entity. GCI CEO Ron Duncan and other GCI management will continue in those roles after the close.