Charter 2015 Annual Report Download - page 108

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015, 2014 AND 2013
(dollars in millions, except share or per share data or where indicated)
F- 11
Segments
The Company’s operations are conducted through the use of a unified network and are managed and reported to its Chief Executive
Officer ("CEO"), the Company's chief operating decision maker, on a consolidated basis. The CEO assesses performance and
allocates resources based on the consolidated results of operations. Under this organizational and reporting structure, the Company
has one reportable segment, broadband services.
3. Mergers and Acquisitions
TWC Transaction
On May 23, 2015, the Company entered into an Agreement and Plan of Mergers (the “Merger Agreement”) with Time Warner
Cable Inc. ("TWC"), CCH I, LLC (“New Charter”), a wholly owned subsidiary of the Company; Nina Corporation I, Inc., Nina
Company II, LLC, a wholly owned subsidiary of New Charter; and Nina Company III, LLC, a wholly owned subsidiary of New
Charter, pursuant to which the parties will engage in a series of transactions that will result in Charter and TWC becoming wholly
owned subsidiaries of New Charter (the “TWC Transaction”), on the terms and subject to the conditions set forth in the Merger
Agreement. After giving effect to the TWC Transaction, New Charter will be the new public company parent that will hold the
operations of the combined companies. Upon consummation of the TWC Transaction, each outstanding share of TWC common
stock (other than TWC stock held by Liberty Broadband Corporation ("Liberty Broadband") and Liberty Interactive Corporation
("Liberty Interactive") (collectively, the "Liberty Parties")), will be converted into the right to receive $100 in cash and shares of
New Charter Class A common stock ("New Charter common stock") equivalent to 0.5409 shares of Charter Class A common
stock. Each stockholder of TWC will also have the option to elect to receive for each outstanding share of TWC common stock
(other than TWC stock held by the Liberty Parties) $115 in cash and shares of New Charter common stock equivalent to 0.4562
shares of Charter common stock. Upon consummation of the TWC Transaction, each share of TWC common stock held by the
Liberty Parties will be converted into New Charter common stock. The total enterprise value of TWC based on the estimated
value of purchase price consideration is approximately $79 billion, including cash, equity and TWC debt to be assumed. The value
of the consideration will fluctuate based on the number of shares outstanding and the market value of Charter's Class A common
stock on the acquisition date, among other factors. In certain circumstances a termination fee may be payable by either Charter
or TWC upon termination of the TWC Transaction as more fully described in the Merger Agreement.
Bright House Transaction
On March 31, 2015, the Company entered into a definitive Contribution Agreement (the “Contribution Agreement”), which was
amended on May 23, 2015 in connection with the execution of the Merger Agreement, with Advance/Newhouse Partnership (“A/
N”), A/NPC Holdings LLC, New Charter and Charter Communications Holdings, LLC (“Charter Holdings”), the Company's
wholly owned subsidiary, pursuant to which Charter would become the owner of the membership interests in Bright House
Networks, LLC (“Bright House”) and any other assets (other than certain excluded assets and liabilities and non-operating cash)
primarily related to Bright House (the “Bright House Transaction”). At closing, Charter Holdings will pay to A/N approximately
$2 billion in cash and issue to A/N convertible preferred units of Charter Holdings with a face amount of $2.5 billion which will
pay a 6% coupon, and approximately 34.3 million common units of Charter Holdings that are exchangeable into New Charter
common stock on a one-for-one basis with a value of approximately $6 billion.
Liberty Transaction and Debt Financing for the TWC Transaction and Bright House Transaction
Assuming that all TWC stockholders (excluding the Liberty Parties) elect the $100 per share cash option, the cash portion of the
consideration for the TWC Transaction is expected to be approximately $28 billion and the cash portion of the Bright House
Transaction is approximately $2 billion. In connection with the TWC Transaction, Charter and Liberty Broadband entered into
an investment agreement, pursuant to which Liberty Broadband agreed to invest $4.3 billion in New Charter at the closing of the
TWC Transaction to partially finance the cash portion of the TWC Transaction consideration. In connection with the Bright House
Transaction, Liberty Broadband agreed to purchase at the closing of the Bright House Transaction $700 million of New Charter
Class A common stock (or, if the TWC Transaction is not consummated prior to the completion of the Bright House Transaction,
Charter Class A common stock).
Charter expects to finance the remaining cash portion of the purchase price of the TWC Transaction and Bright House Transaction
with additional indebtedness. As discussed in Note 8, the Company issued $15.5 billion CCO Safari II, LLC ("CCO Safari II")