Charter Communications Inc. has scooped up Bright House Networks with a proposed $10.4-billion takeover bid that accelerates the consolidation of the cable television and Internet service landscape.
The move is part of Charter's aggressive push to become an industry juggernaut. The deal, announced Tuesday, and another pending transaction with Comcast Corp. would make Charter the second-largest cable operator in the U.S. with about 10 million customers.
Privately held Bright House Networks is the nation's sixth-largest cable operator, with more than 2 million subscribers. The Syracuse, N.Y., company serves about 65,000 subscribers in Bakersfield, as well as fast-growing Florida markets of Tampa and Orlando, and portions of Detroit, Indianapolis and Birmingham, Ala.
Charter, of Stamford, Conn., has been on the march since cable mogul John Malone's Liberty Media acquired 27% of the cable company two years ago.
Charter made an unsuccessful attempt to buy Time Warner Cable, currently the nation's second-largest cable company. But the larger Comcast pounced on that prize. After Comcast unveiled its $45-billion deal early last year for Time Warner Cable, Comcast entered into a separate arrangement with Charter to divvy up subscribers in several markets, which would allow Charter to significantly expand its footprint.
Shares of Charter soared $9.72, or 5.3%, to $193.11 on Tuesday. During regular trading, the company's stock hit an all-time high.
"Bright House is a net benefit all around, in our view," Wells Fargo Securities analyst Marci Ryvicker said in a note to investors.
"We are acquiring Bright House for an attractive price," Tom Rutledge, chief executive of Charter Communications, told Wall Street analysts on a conference call.
Bright House is owned by Advance/Newhouse Partnership.
The acquisition would further Charter's ambitious plans to expand amid an increasingly competitive landscape. Viewers increasingly are turning to digital options for their entertainment, and programming companies have been charging higher fees for the rights to distribute their channels. Pay-TV companies, including Comcast, AT&T Inc. and Charter, believe that they must get bigger to level the playing field during carriage negotiations with programmers.
What's more, traditional operators like Charter and Comcast have been looking over their shoulder as content providers such as Time Warner's HBO and Walt Disney Co.'s ESPN and ABC strike deals to deliver their networks to consumers over the Internet on platforms such as Sony's PlayStation game console and Dish Network's Sling TV.
These are the ingredients fueling the rapid consolidation of the pay-TV industry.
Last year, after Comcast, the nation's largest cable operator, offered to buy Time Warner Cable, telecommunications giant AT&T quickly entered into a separate deal to buy DirecTV for $49 billion. Both of those deals are awaiting approval by federal regulators.
The Charter-Bright House deal is contingent on several factors, including approval by Charter shareholders and the closing of the transaction that Charter entered into last year with Comcast.
In that deal, Charter agreed to swap subscribers in several markets with Comcast, which had an incentive to shed some subscribers that it would gain through its Time Warner Cable takeover to make that deal more acceptable to federal regulators.
If the Comcast-Time Warner Cable deal is approved, Comcast would pick up nearly 300,000 subscribers in the Los Angeles region now served by Charter. Those customers live in cities such as Long Beach, Malibu, Burbank, Glendale and Alhambra.
Charter's proposed acquisition of Bright House also requires federal and state regulatory approvals.