Charter in talks to buy Bright House Networks

Charter Communications Inc., the U.S. cable company that was outbid in an effort to buy Time Warner Cable Inc. last year, is in talks to acquire billionaire Si Newhouse Jr.’s Bright House Networks, people with knowledge of the matter said.

The discussions have been ongoing for months and both sides have agreed on the outline of a potential all-stock deal, two people said, asking not to be identified discussing private information.

Bright House, with about 2.5 million cable subscribers in states including Indiana, Florida, California and Michigan, could be valued at over $12 billion if it fetches the same per-subscriber value that Charter last year agreed to pay in a deal with Comcast Corp.

Charter shares rose more than 3 percent, to $188.20 per share, Thursday afternoon, giving the company a market value of $21 billion. Closely held Bright House is owned by Newhouse’s Advance Publications Inc., which also controls Conde Nast Publications and the Golf Digest Cos.

Bright House has more than 120,000 customers in central Indiana, especially in Hendricks, Boone, Hamilton, Marion and Grant counties.

A spokesman for Charter declined to comment on the talks. Bright House replied to IBJ in an e-mail:

“Since the Time Warner Cable/Comcast transaction was announced, there has been some speculation regarding Bright House," Kimberly Maki, Bright House's vice president of corporate communications, said in the e-mail. "While we have had conversations with many parties about this transaction, we do not have an agreement with anyone regarding future plans for Bright House.”

The companies aren’t likely to announce any deal before regulators are able to rule on Comcast’s acquisition of Time Warner Cable said one of the people, and it’s possible that no formal agreement will be reached.

Syracuse, New York-based Bright House, the sixth-largest U.S. cable company, would be a consolation prize for Charter after it missed out on Time Warner Cable last year. Charter made an unsolicited offer valuing Time Warner at about $61 billion, including debt, before the company agreed to sell itself to rival cable-operator Comcast.

Talks are complicated by who will control voting shares of Charter after an acquisition, said two of the people. Liberty Broadband Corp. owns about 26 percent of Charter and is looking to increase its influence over the company, said one of the people.

A spokeswoman for Liberty didn’t return a call seeking comment.

Charter and Liberty have publicly stated their desire to grow through acquisitions. Charter “would likely pursue” Time Warner Cable if a Comcast merger fails, Greg Maffei, Liberty Broadband’s chief executive officer, said earlier this month.

Charter agreed last April to take control of 3.9 million cable-TV customers in a three-part deal with Comcast that’s meant to ease the approval process for the Comcast-Time Warner Cable deal.

If Comcast’s buyout of Time Warner cable is approved, GreatLand Connections would replace Comcast in the Indianapolis metropolitan area. Charter would hold a 33-percent stake in Greatland, according to regulatory filings.

It’s unclear exactly how big of a cable-customer footprint Bright House has in the area, but franchise fees suggest it was the second-biggest player in Marion County in 2013, the latest year of available data.

According to the Indiana Utility Regulatory Commission, Marion County collected about $11.8 million in franchise fees that year, of which Comcast paid about $4.8 million. Bright House and AT&T followed, respectively, with $3.7 million and $3.4 million.

Those fees, which are paid to municipalities across the state, represent 5 percent of gross receipts the companies collect for video services, excluding Internet- and voice-service revenues.