S-4 1 d933267ds4.htm FORM S-4 Form S-4
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As filed with the Securities and Exchange Commission on June 25, 2015

Registration No.            

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

CCH I, LLC

(to be converted into CCH I, Inc.)

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware   4841   13-4257699
(State or Other Jurisdiction of
Incorporation or Organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

400 Atlantic Street

Stamford, Connecticut 06901

(203) 905-7801

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

 

Richard R. Dykhouse, Esq.

Executive Vice President, General

Counsel and Corporate Secretary

400 Atlantic Street

Stamford, Connecticut 06901

(203) 905-7801

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)

 

 

Copies to:

 

Steven A. Cohen, Esq.
DongJu Song, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
(212) 403-1000
  Marc Lawrence-Apfelbaum, Esq.
Executive Vice President, General
Counsel and Secretary
Time Warner Cable Inc.
60 Columbus Circle
New York, New York 10023
(212) 364-8200
  Robert B. Schumer, Esq.
Ariel J. Deckelbaum, Esq.
Ross A. Fieldston, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, New York 10019
(212) 373-3000

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective and the satisfaction or waiver of all other conditions to the closing of the transactions described herein.

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ¨

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the “Securities Act”), check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act of 1934.

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   ¨


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If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Securities Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ¨

Securities Exchange Act Rule 14d-l(d) (Cross-Border Third-Party Tender Offer)  ¨

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of each class of

securities to be registered

 

Amount

to be

registered

 

Proposed

maximum

offering price

per share

 

Proposed

maximum

aggregate

offering price

 

Amount of

registration fee

Class A common stock, par value $0.001 per share

  257,272,907 shares(1)   N/A   $44,386,978,108(2)   $2,976,167.78(3)(4)

 

 

(1) The number of shares of Class A common stock, par value $0.001 per share, of the Registrant (“New Charter Class A common stock”) being registered is based upon the sum of (i) the product obtained by multiplying (x) 274,382,563 shares of common stock, par value $0.01 per share, of Time Warner Cable Inc. (“TWC” and such common stock, “TWC common stock”), the estimated number of shares of TWC common stock (excluding shares of TWC common stock covered by clause (ii) below) that may be canceled and exchanged in the mergers by (y) 0.48908178, which is the default exchange ratio per share of New Charter Class A common stock for each share of TWC common stock, plus (ii) the product obtained by multiplying (x) 8,495,692 shares of TWC common stock, the estimated number of shares of TWC common stock that are or may be held by Liberty Broadband Corporation and Liberty Interactive Corporation that may be canceled and exchanged in the mergers (that would be subject to the contribution agreement among the parties and the exchange ratio specified in the following clause (y)) by (y) 1.0, which is the effective exchange ratio per share of New Charter Class A common stock for each share of TWC common stock that is applicable to shares of TWC common stock held by Liberty Broadband Corporation and Liberty Interactive Corporation that are subject to the contribution agreement among the parties, plus (iii) the product obtained by multiplying (x) 8,411,414 shares of TWC common stock, the number of shares issuable upon the exercise or settlement of TWC options and restricted stock units outstanding as of June 22, 2015 by (y) 1.01758178 (which is the stock award exchange ratio, calculated assuming that the volume weighted average per-share price of Charter Class A Common Stock during the ten full trading days ending on the trading day preceding the completion of the mergers is equal to $171.09 (which is the volume weighted average per-share of Charter Class A common stock on NASDAQ Global Select Market over the ten business days as of June 22, 2015)), plus (iv) the product obtained by multiplying (x) 112,022,583 shares of Class A common stock, par value $0.001 per share, of Charter Communications, Inc. (“Charter Class A common stock”), the estimated number of shares of Charter Class A common stock that may be canceled and exchanged in the mergers by (y) the exchange ratio of 0.9042 per share of Charter Class A common stock for each share of New Charter Class A common stock, plus (v) the product obtained by multiplying (x) 5,232,893 shares of Charter Class A common stock, the number of shares issuable upon the exercise or settlement of Charter options and restricted stock units outstanding as of June 22, 2015 by (y) the exchange ratio of 0.9042. Calculations are based on shares outstanding as of June 22, 2015.
(2) Pursuant to Rules 457(f) and 457(c) under the Securities Act and solely for the purpose of calculating the registration fee, the proposed maximum aggregate offering price is the sum of (i) the product obtained by multiplying (x) $177.96 (the average of the high and low prices of TWC common stock as reported by the New York Stock Exchange on June 22, 2015), by (y) 291,289,669 shares of TWC common stock (the maximum number of shares of TWC common stock (including shares of TWC common stock held by Liberty Broadband Corporation and Liberty Interactive Corporation) that may be canceled and exchanged in the mergers plus the aggregate number of shares issuable upon the exercise or settlement of TWC options and restricted stock units outstanding as of June 22, 2015 that are or may become exercisable or issuable upon settlement prior to completion of the mergers), plus (ii) the product obtained by multiplying (a) $170.93 (the average of the high and low prices of Charter Class A common stock as reported by the NASDAQ Global Select Market on June 22, 2015), by (b) 117,255,476 shares of Charter Class A common stock (the maximum number of shares of Charter Class A common stock that may be canceled and exchanged in the mergers plus the aggregate number of shares issuable upon the exercise or settlement of Charter options and restricted stock units outstanding as of June 22, 2015 that are or may become exercisable or issuable upon settlement prior to completion of the mergers), minus (iii) $27,493,409,900 (the estimated minimum amount of cash to be paid by the registrant in connection with the mergers based on the $100 per share election option).
(3) Calculated pursuant to Section 6(b) of the Securities Act and SEC Fee Rate Advisory #1 for fiscal year 2015 at a rate equal to $116.20 per $1,000,000 of the proposed maximum aggregate offering price.
(4) In accordance with Rule 457(p) under the Securities Act, the filing fee paid in connection with this registration statement is being offset partially against $2,181,599.08 of unused registration fee paid on February 2, 2015 with respect to 111,999,687 shares of Class A Common Stock of CCH I, Inc. remaining unsold under the Registration Statement on Form S-4 (File No. 333-200809) filed by CCH I, LLC on December 9, 2014, in connection with an offering that was terminated on April 24, 2015. As a result, the filing fee due in connection with this filing is $2,976,167.78.

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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EXPLANATORY NOTE

CCH I, LLC, the registrant whose name appears on the cover of this registration statement and which we refer to as New Charter, is a Delaware limited liability company and a wholly owned subsidiary of Charter Communications, Inc., which we refer to as Charter. Prior to the issuance of the shares in connection with the transactions described in this registration statement, New Charter will be converted into a Delaware corporation and undergo certain reorganization transactions described herein. New Charter is filing this registration statement on Form S-4 to register shares of its Class A common stock, par value $0.001 per share, that will be issued, after its conversion to a corporation, in connection with the mergers described herein. Following the transaction, we expect New Charter to be a successor registrant to Charter for purposes of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Pursuant to the instructions on Form S-4, the joint proxy statement/prospectus which forms a part of this registration statement is also deemed filed pursuant to Charter’s and Time Warner Cable Inc.’s (“TWC”) obligations under Regulation 14A in connection with Charter’s and TWC’s respective special meetings of stockholders to approve the transactions described herein.


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Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This joint proxy statement/prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.

 

PRELIMINARY—SUBJECT TO COMPLETION—DATED JUNE 25, 2015

 

LOGO    LOGO

[●], 2015

TRANSACTION PROPOSALS—YOUR VOTE IS VERY IMPORTANT

Dear Stockholders of Charter Communications, Inc. and Time Warner Cable Inc.:

Charter Communications, Inc., or Charter, CCH I, LLC, or New Charter, and Time Warner Cable Inc., or TWC, have entered into an Agreement and Plan of Mergers, dated as of May 23, 2015, which is referred to as the merger agreement, under which both TWC and Charter will become wholly owned subsidiaries of New Charter following a series of merger transactions. If the mergers are completed, each share of TWC common stock (with certain exceptions described in the accompanying joint proxy statement/prospectus) will convert into the right to receive either (at the election of the holder thereof):

 

    $100 in cash and New Charter Class A common stock equivalent to 0.5409 shares of Charter’s existing Class A common stock (that is approximately 0.4891 shares of New Charter Class A common stock after taking into account the exchange ratio discussed in the third paragraph of this letter, which will be applied to calculate the actual number of shares of New Charter Class A common stock that TWC stockholders will be entitled to receive if the mergers are completed); or

 

    $115 in cash and New Charter Class A common stock equivalent to 0.4562 shares of Charter’s existing Class A common stock (that is approximately 0.4125 shares of New Charter Class A common stock after taking into account the exchange ratio discussed in the third paragraph of this letter, which will be applied to calculate the actual number of shares of New Charter Class A common stock that TWC stockholders will be entitled to receive if the mergers are completed).

If the mergers are completed, each share of TWC common stock held by Liberty Broadband Corporation, which is referred to as Liberty Broadband, and Liberty Interactive Corporation, which is referred to as Liberty Interactive, will convert into the right to receive shares of New Charter Class A common stock equivalent to 1.106 shares of Charter’s existing Class A common stock (that is one share of New Charter Class A common stock, after taking into account the exchange ratio discussed in the following paragraph) and neither Liberty Broadband nor Liberty Interactive will have a right to receive cash in respect of its shares of TWC common stock, subject to the terms of the Liberty contribution agreement. In addition, in connection with the completion of the mergers, New Charter will issue to Liberty Broadband approximately 21.97 million shares of New Charter Class A common stock, for which Liberty Broadband will pay $4.3 billion (for a total of $5 billion taken together with the additional $700 million investment by Liberty Broadband in connection with Charter’s transaction with Advance/Newhouse Partnership (as further described below)).

If the mergers are completed, each share of Charter’s outstanding Class A common stock will convert into the right to receive 0.9042 shares of New Charter Class A common stock. The exchange ratio of 0.9042 will be used to determine the number of shares of New Charter Class A common stock that both TWC stockholders and Charter stockholders will be entitled to receive in the mergers and, therefore, the application of that exchange ratio will not impact the aggregate value represented by the shares of New Charter Class A common stock to be received by TWC stockholders or Charter stockholders upon completion of the mergers.

In addition, following the completion of the mergers, Charter expects to complete its previously announced transaction with Advance/Newhouse Partnership, or A/N, pursuant to which A/N will contribute the membership interests in Bright House Networks, LLC, or Bright House, and any other assets (other than certain excluded assets and liabilities) primarily related to Bright House’s business to Charter Communications Holdings, LLC, a wholly owned indirect subsidiary of Charter, or Charter Holdings, in exchange for cash, common and preferred units of Charter Holdings (which are exchangeable or convertible in certain circumstances for New Charter Class A common stock) and one share of a new class of New Charter common stock (Class B common stock) with voting rights generally intended to reflect A/N’s economic interests in New Charter and Charter Holdings. The foregoing transactions described in this paragraph are collectively referred to as the BHN transactions. In addition, in connection with the completion of the BHN transactions, New Charter will issue to Liberty Broadband approximately 3.66 million shares of New Charter Class A common stock if the mergers are consummated, or 4.05 million shares of Charter Class A common stock if the mergers are not consummated, for which Liberty Broadband will pay $700 million.

Based on the number of shares of TWC common stock outstanding as of June 10, 2015, and the number of shares of Charter Class A common stock outstanding as of June 10, 2015, it is expected that, immediately after completion of the mergers, the transactions with Liberty Broadband and the BHN transactions, and depending on the outcome of the election feature described above, TWC stockholders, excluding Liberty Broadband, are expected to own between approximately 41% and 45% of New Charter, A/N is expected to own between approximately 14% and 13% of New Charter, Liberty Broadband is expected to own between approximately 19% and 18% of New Charter and existing Charter stockholders (other than Liberty Broadband) are expected to own between approximately 26% and 24% of New Charter.


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The shares of TWC common stock are traded on the New York Stock Exchange under the symbol “TWC” and the shares of Charter Class A common stock are traded on the NASDAQ Global Select Market under the symbol “CHTR.” Following the completion of the mergers, it is expected that shares of New Charter Class A common stock will be traded on the NASDAQ Global Select Market under the symbol “CHTR” and New Charter will change its name to Charter Communications, Inc.

Each of TWC and Charter will be holding a special meeting for its respective stockholders to vote on certain matters in connection with the proposed mergers and other transactions.

TWC stockholders are cordially invited to attend a special meeting of TWC stockholders to be held on [●], 2015, at [●], located at [●], at [●], local time. TWC is holding its special meeting of stockholders in order to obtain the stockholder approval necessary to complete the mergers.

Charter stockholders are cordially invited to attend a special meeting of Charter stockholders to be held on [●], 2015, located at [●], at [●], local time. Charter is holding its special meeting of stockholders in order to obtain the stockholder approvals necessary to complete the mergers, the Liberty transactions and the BHN transactions.

The mergers (and in certain circumstances the BHN transactions) cannot be completed unless TWC and Charter stockholders approve the matters that will be presented at each company’s special meeting of stockholders.

Your vote is very important, regardless of the number of shares you own. Whether or not you expect to attend the TWC special meeting or the Charter special meeting in person, please vote or otherwise submit a proxy to vote your shares as promptly as possible so that your shares may be represented and voted at the TWC special meeting or the Charter special meeting. If your shares are held in the name of a bank, broker, nominee or other record holder, please follow the instructions on the voting instruction form furnished to you by such record holder.

In addition, at the TWC special meeting, TWC stockholders will be asked to approve, on an advisory (non-binding) basis, certain specified compensation that will or may be paid by TWC to its named executive officers in connection with the mergers, and at the Charter special meeting, Charter stockholders will be asked to approve, on an advisory (non-binding) basis, certain specified compensation that will or may be paid by Charter to its named executive officers in connection with the mergers.

The TWC board of directors unanimously recommends that TWC stockholders vote “FOR” the adoption of the merger agreement and “FOR” the TWC advisory compensation proposal.

The Charter board of directors unanimously recommends that Charter stockholders vote “FOR” the adoption of the merger agreement, “FOR” the approval of each of the stock issuances proposals, “FOR” the approval of the Liberty transactions proposal, “FOR” the approval of each of the certificate of incorporation proposals and “FOR” the Charter advisory compensation proposal.

The accompanying joint proxy statement/prospectus provides important information regarding the special meetings and a detailed description of the merger agreement, the mergers, the Liberty transactions, the BHN transactions and the matters to be presented at the special meetings. We urge you to read the accompanying joint proxy statement/prospectus (and any documents incorporated by reference into the accompanying joint proxy statement/prospectus) carefully. Please pay particular attention to the section entitled “Risk Factors,” beginning on page 86.

We hope to see you at the special meetings and look forward to the successful completion of the mergers and the other transactions.

Sincerely,

 

Thomas M. Rutledge

President and Chief Executive Officer

Charter Communications, Inc.

Robert D. Marcus

Chairman and Chief Executive Officer

Time Warner Cable Inc.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under the accompanying joint proxy statement/prospectus or determined that the accompanying joint proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

The accompanying joint proxy statement/prospectus is dated [●], 2015, and is first being mailed to Charter and TWC stockholders on or about [●], 2015.


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ADDITIONAL INFORMATION

The accompanying document is the joint proxy statement of TWC and Charter for the special meetings of stockholders of each of TWC and Charter and the prospectus of New Charter for its shares of New Charter Class A common stock to be issued to TWC and Charter stockholders as consideration in the mergers. The accompanying joint proxy statement/prospectus incorporates important business and financial information about Charter and TWC from documents that are not included in or delivered with the accompanying joint proxy statement/prospectus. This information is available to you without charge upon your written or oral request. You can obtain documents incorporated by reference into the accompanying joint proxy statement/prospectus (other than certain exhibits or schedules to these documents) by requesting them in writing or by telephone from Charter or TWC at the following addresses and telephone numbers:

 

Charter Communications, Inc.

400 Atlantic Street

Stamford, Connecticut 06901

Attention: Investor Relations

Telephone: (203) 905-7801

Time Warner Cable Inc.

60 Columbus Circle

New York, New York 10023

Attention: Investor Relations

Telephone: (877) 446-3689

In addition, if you have questions about the mergers, the other transactions described above or the accompanying joint proxy statement/prospectus, would like additional copies of the accompanying joint proxy statement/prospectus or need to obtain proxy cards or other information related to the proxy solicitation, please contact MacKenzie Partners, Inc., the proxy solicitor for TWC, toll-free at (800) 322-2885 or collect at (212) 929-5500, or Innisfree M&A Incorporated, the proxy solicitor for Charter, toll-free at (888) 750-5834 or collect at (212) 750-5833. You will not be charged for any of these documents that you request.

If you would like to request documents, please do so no later than five business days before the date of Charter’s special meeting of stockholders (which meeting is to be held on [●], 2015) or five business days before the date of TWC’s special meeting of stockholders (which meeting is to be held on [●], 2015), as applicable.

See “Where You Can Find More Information,” beginning on page [●] of the accompanying joint proxy statement/prospectus for further information.


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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS OF

CHARTER COMMUNICATIONS, INC.

TO BE HELD ON [], 2015

To the Stockholders of Charter Communications, Inc.:

NOTICE IS HEREBY GIVEN of a special meeting of stockholders of Charter Communications, Inc., a Delaware corporation (“Charter”), which will be held on [●], 2015, at [●], at [●], local time, for the following purposes:

 

    to consider and vote on a proposal to approve the adoption of the Agreement and Plan of Mergers, dated as of May 23, 2015 (as may be amended, the “merger agreement”), among Charter, Time Warner Cable Inc. (“TWC”), CCH I, LLC (“New Charter”), Nina Corporation I, Inc., Nina Company II, LLC (“Merger Subsidiary Two”) and Nina Company III, LLC (“Merger Subsidiary Three”), pursuant to which, among other things, (i) TWC will be merged with and into Merger Subsidiary Two, with Merger Subsidiary Two continuing as the surviving entity and a wholly owned subsidiary of New Charter and (ii) Charter will be merged with and into Merger Subsidiary Three, with Merger Subsidiary Three continuing as the surviving entity and a wholly owned subsidiary of New Charter (we refer to this proposal as the “Charter merger proposal”);

 

    to consider and vote on a proposal to approve the issuance of Class A common stock, par value $0.001 per share, of New Charter in connection with the mergers contemplated by the merger agreement (the “TWC transactions”) (we refer to this proposal as the “TWC transactions stock issuance proposal”);

 

    to consider and vote on a proposal to approve the issuance of (i) a newly created Class B common stock, par value $0.001 per share, of New Charter or Charter, as applicable, and (ii) common units and preferred units of Charter Communications Holdings, LLC (including shares of Class A common stock of New Charter or Charter, as applicable, which may be issued upon conversion or exchange of such common units or preferred units), in each case in connection with the transactions contemplated by the contribution agreement with Advance/Newhouse Partnership (“A/N”) (we refer to this proposal as the “BHN transactions stock issuance proposal” and together with the TWC transactions stock issuance proposal, the “stock issuances proposals”);

 

    to consider and vote on a proposal to approve the stockholders agreement with A/N and Liberty Broadband Corporation (“Liberty Broadband”) (including the issuance of shares of New Charter or Charter Class A common stock to Liberty Broadband thereunder), the investment agreement with Liberty Broadband (including the issuance of New Charter Class A common stock to Liberty Broadband thereunder), the contribution agreement with Liberty Broadband and Liberty Interactive Corporation (“Liberty Interactive”) and other transactions contemplated by the merger agreement and the foregoing agreements with Liberty Broadband and Liberty Interactive, as required by Charter’s existing certificate of incorporation (we refer to this proposal as the “Liberty transactions proposal”);

 

    to consider and vote on a proposal to approve the adoption of the amended and restated certificate of incorporation (which will include the creation of the new class of Class B common stock of New Charter or Charter, as applicable) that will either be the amended and restated certificate of incorporation of New Charter if the TWC transactions are consummated or the amended and restated certificate of incorporation of Charter if the TWC transactions are not consummated but the transactions with A/N are consummated (we refer to this proposal as the “general certificate of incorporation proposal”);

 

    to consider and vote on a proposal to approve separately a feature of the amended and restated certificate of incorporation of New Charter or Charter, as applicable, that will provide that the special approval requirements for certain business combination transactions contained in Article Eighth of Charter’s existing certificate of incorporation will only be effective upon the termination of the contribution agreement with A/N and will not apply to any transaction agreed or consummated prior to such time (we refer to this proposal as the “certificate of incorporation feature proposal 1”);

 

   

to consider and vote on a proposal to approve separately a feature of the amended and restated certificate of incorporation of New Charter or Charter, as applicable, that will set forth the size and composition requirements for the board of directors that are required by the stockholders agreement


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with Liberty Broadband and A/N (we refer to this proposal as the “certificate of incorporation feature proposal 2”);

 

    to consider and vote on a proposal to approve separately a feature of the amended and restated certificate of incorporation of New Charter or Charter, as applicable, that will specify standards for decisions by the board of directors that are required by the stockholders agreement with Liberty Broadband and A/N (we refer to this proposal as the “certificate of incorporation feature proposal 3”);

 

    to consider and vote on a proposal to approve separately a feature of the amended and restated certificate of incorporation of New Charter or Charter, as applicable, that will provide for certain voting restrictions on Liberty Broadband and A/N as required by the stockholders agreement with Liberty Broadband and A/N (we refer to this proposal as the “certificate of incorporation feature proposal 4,” and together with the general certificate of incorporation proposal and the certificate of incorporation feature proposals 1, 2 and 3, the “certificate of incorporation proposals”); and

 

    to consider and vote on a proposal to approve, on an advisory (non-binding) basis, certain specified compensation that will or may be paid by Charter to its named executive officers in connection with the transactions (we refer to this proposal as the “Charter advisory compensation proposal”).

Copies of the merger agreement, contribution agreement with A/N, stockholders agreement with Liberty Broadband and A/N, Liberty investment agreement, Liberty contribution agreement and the proposed amended and restated certificate of incorporation are attached as Annexes A, B, C, D, E and G, respectively, to the joint proxy statement/prospectus accompanying this notice.

Charter will transact no other business at the special meeting, except such business as may properly be brought before the special meeting or any adjournment or postponement thereof and set forth in the notice for such special meeting or any adjournment or postponement thereof in accordance with Charter’s bylaws.

The Charter board of directors has fixed the close of business on [●], 2015 as the record date for the special meeting or any adjournment or postponement of the Charter special meeting. Only Charter stockholders of record as of the record date are entitled to receive notice of, and to vote at, the special meeting or any adjournment or postponement thereof. A complete list of such stockholders will be available for inspection by any Charter stockholder for any purpose germane to the special meeting during ordinary business hours for the 10 days preceding the special meeting at Charter’s offices at the address on this notice. The eligible Charter stockholder list will also be available at the special meeting for examination by any stockholder present at such meeting.

The Charter board of directors unanimously recommends that Charter stockholders vote “FOR” the approval of the Charter merger proposal, “FOR” the approval of each of the stock issuances proposals, “FOR” the approval of the Liberty transactions proposal, “FOR” the approval of each of the certificate of incorporation proposals and “FOR” the Charter advisory compensation proposal.

Your vote is very important. Whether or not you expect to attend the special meeting in person, to ensure your representation at the special meeting, we urge you to authorize the individuals named on your proxy card to vote your shares as promptly as possible by (1) accessing the Internet site listed on the proxy card, (2) calling the toll-free number listed on the proxy card or (3) submitting your proxy card by mail by using the provided self-addressed, stamped envelope. If you hold your shares in “street name,” you should instruct your broker how to vote your shares in accordance with your voting instruction form. Charter stockholders may revoke their proxy in the manner described in the accompanying proxy statement/prospectus before it has been voted at the special meeting.

By order of the Board of Directors,

Richard R. Dykhouse

Executive Vice President, General Counsel and Corporate Secretary

[●], 2015


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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS OF

TIME WARNER CABLE INC.

TO BE HELD ON [], 2015

To the Stockholders of Time Warner Cable Inc.:

A special meeting of stockholders of Time Warner Cable Inc., a Delaware corporation (“TWC”), will be held on [●], 2015, at [●], located at [●], at [●], local time, for the following purposes:

 

    to consider and vote on a proposal to approve the adoption of the Agreement and Plan of Mergers, dated as of May 23, 2015 (as may be amended, the “merger agreement”), among TWC, Charter Communications, Inc., CCH I, LLC (“New Charter”), Nina Corporation I, Inc. (“Merger Subsidiary One”), Nina Company II, LLC (“Merger Subsidiary Two”) and Nina Company III, LLC, pursuant to which, among other things, (i) Merger Subsidiary One will be first merged with and into TWC, with TWC continuing as the surviving corporation, and (ii) immediately thereafter TWC will be merged with and into Merger Subsidiary Two, with Merger Subsidiary Two continuing as the surviving entity and a wholly owned subsidiary of New Charter; and

 

    to consider and vote on a proposal to approve, on an advisory (non-binding) basis, certain specified compensation that will or may be paid by TWC to its named executive officers in connection with the mergers.

A copy of the merger agreement is attached as Annex A to the joint proxy statement/prospectus accompanying this notice.

The TWC board of directors has fixed the close of business on [●], 2015 as the record date for determination of the stockholders entitled to vote at the TWC special meeting or any adjournment or postponement of the TWC special meeting. Only stockholders of record as of the record date are entitled to notice of, and to vote at, the TWC special meeting or any adjournment or postponement of the TWC special meeting. A complete list of stockholders entitled to vote at the TWC special meeting will be available for a period of ten days prior to the TWC special meeting at the offices of TWC, located at 60 Columbus Circle, New York, New York 10023 for inspection by any stockholder, for any purpose germane to the TWC special meeting, during usual business hours. The stockholder list also will be available at the TWC special meeting for examination by any stockholder present at the TWC special meeting. In accordance with TWC’s bylaws, the TWC special meeting may be adjourned by the Chairman of the meeting.

If you would like to attend the TWC special meeting, because of security procedures, you will need to register in advance to gain admission to the TWC special meeting. You can register by calling (866) 892-8925 toll-free or sending an email with your name and address to: ir@twcable.com by [●], 2015. In addition to registering in advance, you will be required to present government issued identification (e.g., driver’s license or passport) to enter the meeting. The meeting also will be audiocast live on the Internet at www.twc.com/investors. You may not appoint more than three persons to act as your proxy at the meeting.

If you are a beneficial owner of TWC common stock held in “street name,” meaning that your shares are held by a broker, bank, nominee or other holder of record, as of the record date, in addition to proper identification, you will also need to provide proof of ownership as of the record date to be admitted to the TWC special meeting. A brokerage statement or letter from a bank or broker are examples of proof of ownership. If you want to vote your shares of TWC common stock held in “street name” in person at the TWC special meeting, you will have to obtain a legal proxy in your name from the broker, bank, nominee or other holder of record who holds your shares.

The TWC board of directors unanimously recommends that TWC stockholders vote “FOR” the adoption of the merger agreement and “FOR” the TWC advisory compensation proposal.

By order of the Board of Directors,

Marc Lawrence-Apfelbaum

Executive Vice President, General Counsel and Secretary

New York, New York

[●], 2015


Table of Contents

TABLE OF CONTENTS

 

     Page  

Index of Defined Terms

     1   

Questions And Answers About the Mergers, the Liberty Transactions, the BHN Transactions and the Matters to be Addressed at the Special Meetings

     4   

Summary

     23   

Selected Historical Consolidated Financial Data of Charter

     61   

Selected Historical Consolidated Financial Data of TWC

     62   

Selected Historical Consolidated Financial Data of Bright House

     63   

Comparative Historical and Unaudited Pro Forma Per Share Data

     64   

Comparative Per Share Market Price and Dividend Information

     66   

Unaudited Pro Forma Consolidated Financial Statements

     68   

Risk Factors

     86   

Cautionary Statement Regarding Forward-Looking Statements

     105   

The Companies

     107   

The Charter Special Meeting of Stockholders

     109   

Date, Time and Location

     109   

Purpose

     109   

Recommendations of the Charter Board of Directors

     110   

Charter Record Date; Outstanding Shares; Stockholders Entitled to Vote

     111   

Quorum

     111   

Adjournment

     111   

Required Vote

     111   

Share Ownership of and Voting by Charter Directors and Executive Officers

     113   

Voting of Shares

     113   

Revocability of Proxies; Changing Your Vote

     114   

Solicitation of Proxies; Expenses of Solicitation

     115   

Householding

     115   

Other Information

     115   

Assistance

     116   

The TWC Special Meeting of Stockholders

     117   

Date, Time and Location

     117   

Purpose

     117   

Recommendations of the TWC Board of Directors

     117   

TWC Record Date; Outstanding Shares; Stockholders Entitled to Vote

     118   

Quorum

     118   

Required Vote

     118   

Share Ownership of and Voting by TWC Directors and Executive Officers

     119   

Voting of Shares

     119   

Revocability of Proxies; Changing Your Vote

     121   

Solicitation of Proxies; Expenses of Solicitation

     121   

Householding

     121   

Adjournment

     122   

Other Information

     122   

Assistance

     122   

The Transactions

     123   

General

     123   

Background of the Mergers and Other Transactions

     124   

TWC’s Reasons for the Mergers; Recommendation of the TWC Board of Directors

     141   

Charter’s Reasons for the Mergers and Other Transactions; Recommendation of the Charter Board of Directors

     146   

Opinions of TWC’s Financial Advisors

     149   

 

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     Page  

Opinion of Financial Advisor to the TWC Independent Directors

     165   

Opinions of Charter’s Financial Advisors

     173   

TWC Forecasts

     207   

Charter Forecasts

     209   

Debt Financing for the Mergers and BHN Transactions

     211   

Regulatory Approvals Required for the Mergers

     212   

Regulatory Approvals Required for the BHN Transactions

     214   

Appraisal Rights

     216   

Material U.S. Federal Income Tax Consequences of the Mergers

     216   

Accounting Treatment

     221   

Listing of Shares of New Charter Class  A Common Stock and Delisting and Deregistration of TWC Common Stock

     221   

Litigation Relating to the Mergers

     221   

The Merger Agreement

     223   

The BHN Contribution Agreement

     256   

Other Agreements

     270   

BHN/Liberty Stockholders Agreement

     270   

Liberty Investment Agreement

     278   

Liberty Contribution Agreement

     281   

Voting Agreement

     283   

Interests of TWC’s Directors and Executive Officers in the Transactions

     285   

Interests of Charter’s Directors and Executive Officers in the Transactions

     299   

TWC Proposals

     304   

TWC Proposal I: Approval of the Adoption of the Merger Agreement

     304   

TWC Proposal II: TWC Advisory Compensation Proposal

     304   

Charter Proposals

     305   

Charter Proposal I: Approval of the Adoption of the Merger Agreement

     305   

Charter Proposal II: TWC Transactions Stock Issuance Proposal

     306   

Charter Proposal III: BHN Transactions Stock Issuance Proposal

     306   

Charter Proposal IV: Liberty Transactions Proposal

     307   

Charter Proposal V: General Certificate of Incorporation Proposal

     308   

Charter Proposal VI: Certificate of Incorporation Feature Proposal 1

     309   

Charter Proposal VII: Certificate of Incorporation Feature Proposal 2

     310   

Charter Proposal VIII: Certificate of Incorporation Feature Proposal 3

     310   

Charter Proposal IX: Certificate of Incorporation Feature Proposal 4

     311   

Charter Proposal X: Charter Advisory Compensation Proposal

     312   

Certain Beneficial Owners of TWC Common Stock

     314   

Certain Beneficial Owners of Charter Class A Common Stock

     317   

Bright House Management’s Discussion and Analysis

     321   

Dissenters’ Rights of Appraisal

     330   

Description of Capital Stock

     335   

Comparison of Stockholder Rights

     341   

Legal Matters

     361   

Experts

     361   

Future Stockholder Proposals

     361   

Where You Can Find More Information

     363   

Index to Financial Statements

     F-1   

Annexes

  

Annex A:

 

Agreement and Plan of Mergers

     A-1   

Annex B:

 

BHN Contribution Agreement (including Amendment No. 1 to BHN Contribution Agreement)

     B-1   

 

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         Page  

Annex C:

 

BHN/Liberty Stockholders Agreement

     C-1   

Annex D:

 

Liberty Investment Agreement

     D-1   

Annex E:

 

Liberty Contribution Agreement

     E-1   

Annex F:

 

Voting Agreement

     F-1   

Annex G:

 

Amended and Restated Certificate of Incorporation

     G-1   

Annex H:

 

Opinion of Goldman, Sachs & Co.

     H-1   

Annex I:

 

Opinion of Goldman, Sachs & Co.

     I-1   

Annex J:

 

Opinion of LionTree LLC

     J-1   

Annex K:

 

Opinion of LionTree LLC

     K-1   

Annex L:

 

Opinion of Allen & Company LLC

     L-1   

Annex M:

 

Opinion of Citigroup Global Markets Inc.

     M-1   

Annex N:

 

Opinion of Morgan Stanley & Co. LLC

     N-1   

Annex O:

 

Opinion of Centerview Partners LLC

     O-1   

Annex P:

 

Section 262 of the Delaware General Corporation Law

     P-1   

 

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INDEX OF DEFINED TERMS

In this joint proxy statement/prospectus:

“A/N” means Advance/Newhouse Partnership, a New York partnership.

“Bright House” or “BHN” means Bright House Networks, LLC, a Delaware limited liability company.

“BHN contribution agreement” means the Contribution Agreement, dated March 31, 2015, by and among Charter, New Charter, A/N, A/NPC Holdings LLC, and Charter Holdings, as amended on May 23, 2015 and as it may be further amended. A copy of the BHN contribution agreement is attached as Annex B to this joint proxy statement/prospectus.

“BHN/Liberty stockholders agreement” means the Second Amended and Restated Stockholders Agreement, dated as of May 23, 2015, by and among, Liberty Broadband, A/N, New Charter and Charter, as amended from time to time. A copy of the BHN/Liberty stockholders agreement is attached as Annex C to this joint proxy statement/prospectus.

“BHN transactions” means the transactions contemplated by the BHN contribution agreement.

“Charter” means Charter Communications, Inc., a Delaware corporation.

“Charter Class A common stock” means the Class A Common Stock, par value $0.001 per share, of Charter.

“Charter Holdings” means Charter Communications Holdings, LLC, a wholly owned subsidiary of Charter.

“Code” means the Internal Revenue Code of 1986, as amended.

“Communications Act” means the Communications Act of 1934, as amended, together with the rules and regulations promulgated thereunder.

“DGCL” means the Delaware General Corporation Law.

“DOJ” means the United States Department of Justice.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.

“FCC” means the Federal Communications Commission.

“first merger” means the merger of Merger Subsidiary One with and into TWC, with TWC continuing as the surviving corporation. The first merger is also referred to in the merger agreement as the “First Company Merger.”

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

“IRS” means the U.S. Internal Revenue Service or any successor thereto, including its agents, representatives and attorneys.

“Liberty agreements” means the Liberty contribution agreement, the Liberty investment agreement and the BHN/Liberty stockholders agreement.

“Liberty Broadband” means Liberty Broadband Corporation, a Delaware corporation.

 

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“Liberty contribution agreement” means the Contribution Agreement, dated as of May 23, 2015, by and among Charter, New Charter, Merger Subsidiary One, Liberty Broadband and Liberty Interactive, as amended from time to time. A copy of the Liberty contribution agreement is attached as Annex E to this joint proxy statement/prospectus.

“Liberty Interactive” means Liberty Interactive Corporation, a Delaware corporation.

“Liberty investment agreement” means the Investment Agreement, dated as of May 23, 2015, by and among Charter, New Charter and Liberty Broadband, as amended from time to time. A copy of the Liberty investment agreement is attached as Annex D to this joint proxy statement/prospectus.

“Liberty transactions” means the agreements and transactions contemplated by the Liberty agreements, including (i) the issuance of shares of New Charter or Charter Class A common stock to Liberty Broadband pursuant to the Liberty investment agreement and/or the BHN/Liberty stockholders agreement, and (ii) the contribution by Liberty Broadband and Liberty Interactive of their respective shares of TWC common stock to Merger Subsidiary One pursuant to the Liberty contribution agreement and the receipt as part of the mergers of shares of New Charter Class A common stock, as described under “Other Agreements—BHN/Liberty Stockholders Agreement,” “Other Agreements—Liberty Investment Agreement” and “Other Agreements—Contribution Agreement.”

“merger agreement” means the Agreement and Plan of Mergers, dated as of May 23, 2015, by and among Charter, New Charter, Merger Subsidiary One, Merger Subsidiary Two, Merger Subsidiary Three and TWC, as amended from time to time. A copy of the merger agreement is attached as Annex A to this joint proxy statement/prospectus.

“Merger Subsidiary One” means Nina Corporation I, Inc., a Delaware corporation.

“Merger Subsidiary Two” means Nina Company II, LLC, a Delaware limited liability company and wholly owned subsidiary of New Charter.

“Merger Subsidiary Three” means Nina Company III, LLC, a Delaware limited liability company and wholly owned subsidiary of Merger Subsidiary Two.

“mergers” means the first merger, the second merger and the third merger.

“New Charter” means CCH I, LLC, a Delaware limited liability company and wholly owned subsidiary of Charter, which will be converted into a Delaware corporation in accordance with Section 265 of the DGCL and renamed Charter Communications, Inc. immediately prior to the consummation of the mergers. After giving effect to the mergers, New Charter will be the new public company that will hold the operations of the combined companies (TWC and Charter and, if the BHN transactions are consummated, Bright House).

“New Charter Class A common stock” means the Class A common stock, par value $0.001 per share, of New Charter.

“Option A Base Exchange Ratio” means 0.5409.

“Option B Base Exchange Ratio” means 0.4562.

“Option A Effective Exchange Ratio” means the product of the Option A Base Exchange Ratio (0.5409) multiplied by the Parent Merger Exchange Ratio (0.9042).

“Option B Effective Exchange Ratio” means the product of the Option B Base Exchange Ratio (0.4562) multiplied by the Parent Merger Exchange Ratio (0.9042).

 

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“Option A Election” means the option to receive $100 in cash and shares of New Charter based on the Option A Effective Exchange Ratio.

“Option B Election” means the option to receive $115 in cash and shares of New Charter based on the Option B Effective Exchange Ratio.

“Parent Merger Exchange Ratio” means 0.9042.

“SEC” means the U.S. Securities and Exchange Commission.

“second merger” means the merger of TWC with and into Merger Subsidiary Two, with Merger Subsidiary Two continuing as the surviving entity. The second merger is also referred to in the merger agreement as the “Second Company Merger.”

“Securities Act” means the Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder.

“third merger” means the merger of Charter with and into Merger Subsidiary Three, with Merger Subsidiary Three continuing as the surviving entity. The third merger is also referred to in the merger agreement as the “Parent Merger.”

“TWC” means Time Warner Cable Inc., a Delaware corporation.

“TWC transactions” means the mergers, the other transactions contemplated by the merger agreement and the transactions contemplated by the Liberty investment agreement and the Liberty contribution agreement.

“voting agreement” means the Voting Agreement, dated as of May 23, 2015, by and between TWC and Liberty Broadband, as amended from time to time. A copy of the voting agreement is attached as Annex F to this joint proxy statement/prospectus.

 

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QUESTIONS AND ANSWERS ABOUT THE MERGERS, THE LIBERTY TRANSACTIONS, THE BHN TRANSACTIONS AND THE MATTERS TO BE ADDRESSED AT THE SPECIAL MEETINGS

The following questions and answers are intended to address briefly some commonly asked questions regarding the mergers, the Liberty transactions, the BHN transactions and the matters to be addressed at the special meetings. These questions and answers may not address all questions that may be important to TWC or Charter stockholders. To better understand these matters, and for a description of the legal terms governing the mergers, the Liberty transactions and the BHN transactions you should carefully read this entire joint proxy statement/prospectus, including the attached annexes, as well as the documents that have been incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information” in this joint proxy statement/prospectus.

 

Q: Why am I receiving this document?

 

A: Charter and TWC have agreed to a series of mergers, pursuant to which both Charter and TWC will become wholly owned subsidiaries of New Charter, which is currently a wholly owned subsidiary of Charter. The three mergers described in this joint proxy statement/prospectus are intended to facilitate the combination of Charter and TWC, as well as the completion of the BHN transactions. Following the mergers, Charter and TWC will no longer be publicly held corporations and New Charter will be the only publicly held corporation. In addition, following the completion of the mergers, Charter expects to complete the BHN transactions, pursuant to which A/N will contribute the membership interests in BHN and any other assets (other than certain excluded assets) primarily related to BHN’s business to Charter Holdings in exchange for cash, common and preferred units of Charter Holdings (which are exchangeable or convertible in certain circumstances for New Charter Class A common stock) and one share of a new class of New Charter common stock (Class B common stock) with voting rights generally intended to reflect A/N’s economic interests in New Charter and Charter Holdings. The mergers are not conditioned upon completion of the BHN transactions (including the stock issuance to A/N). The mergers and the BHN transactions are subject to separate conditions, and the mergers may be completed whether or not the BHN transactions are ultimately consummated. The consummation of the BHN transactions is conditioned on the completion of the mergers. However, if the mergers are not completed, Charter and A/N may still be obligated to complete the BHN transactions, as described under “The BHN Contribution Agreement” if the tail condition (which is described in greater detail under “The BHN Contribution Agreement—Conditions to the Completion of the Contribution) is satisfied. There can be no assurance that the BHN transactions will be completed if the mergers are not completed.

In order to satisfy the conditions to the completion of the mergers, Charter and TWC stockholders must vote to approve the adoption of the merger agreement and Charter stockholders must vote to approve the stock issuances in connection with the transactions contemplated by the merger agreement, the Liberty investment agreement and the BHN/Liberty stockholders agreement, the Liberty transactions and the amended and restated certificate of incorporation, as described in this joint proxy statement/prospectus.

In order to satisfy the conditions to the completion of the BHN transactions, Charter stockholders must vote to approve the stock issuances in connection with the transactions contemplated by the BHN/Liberty stockholders agreement and the BHN contribution agreement, certain Liberty transactions (including the provisions of the BHN/Liberty stockholders agreement) and the amended and restated certificate of incorporation, as described in this joint proxy statement/prospectus.

TWC is holding a special meeting of stockholders, which is referred to in this joint proxy statement/prospectus as the TWC special meeting, in order to obtain the stockholder approval necessary to complete the mergers. TWC stockholders will also be asked to approve, on an advisory (non-binding) basis, certain specified compensation that will or may be paid by TWC to its named executive officers in connection with the mergers.

Charter is holding a special meeting of stockholders, which is referred to in this joint proxy statement/prospectus as the Charter special meeting, in order to obtain the stockholder approval necessary to complete

 

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the mergers, the Liberty transactions and the BHN transactions. In addition, Charter stockholders will also be asked to approve, on an advisory (non-binding) basis, certain specified compensation that will or may be paid by Charter to its named executive officers in connection with the mergers.

This document is being delivered to you as both a joint proxy statement of TWC and Charter and a prospectus of New Charter in connection with the mergers, the BHN transactions and the Liberty transactions. It is the proxy statement by which the TWC board of directors is soliciting proxies from TWC stockholders to vote at the TWC special meeting, or at any adjournment or postponement of the TWC special meeting, on the matters described in this joint proxy statement/prospectus. It is also the proxy statement by which the Charter board of directors is soliciting proxies from Charter stockholders to vote at the Charter special meeting, or at any adjournment or postponement of the Charter special meeting, on the matters described in this joint proxy statement/prospectus, including in connection with the mergers, the Liberty transactions and the BHN transactions. In addition, this document is the prospectus by which New Charter will issue shares of New Charter Class A common stock to TWC and Charter stockholders in the mergers.

Your vote is important. We encourage you to vote as soon as possible.

 

Q: What will TWC stockholders receive in the mergers?

 

A: If the first merger and the second merger are completed, after giving effect to the first and second mergers and application of the Option A Base Exchange Ratio or the Option B Base Exchange Ratio described in this joint proxy statement/prospectus, each share of TWC common stock outstanding immediately prior to the completion of the first merger (other than certain shares, as described below) will effectively be converted into the right to receive either (at the election of the holder thereof):

 

    $100 in cash and shares of New Charter Class A common stock equivalent to 0.5409 shares of Charter Class A common stock (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”).

However, the actual number of shares of New Charter Class A common stock that TWC stockholders (except as described below) will be entitled to receive will be calculated by multiplying the exchange ratios of 0.5409 (which is the Option A Base Exchange Ratio) or 0.4562 (which is the Option B Base Exchange Ratio) specified above by 0.9042 (which is 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 in the third merger as described below. Therefore, the application of the Parent Merger Exchange Ratio to the stock portion of the merger consideration to be received by the TWC stockholders will not impact the aggregate value represented by the shares of New Charter Class A common stock to be received by TWC stockholders upon completion of the mergers. The foregoing calculations and mechanics are described in greater detail under “The Merger Agreement—Merger Consideration.” In addition, TWC stockholders (except as described below) will receive cash in lieu of any fractional share of TWC common stock as a result of the mergers, as described under “The Merger Agreement—Fractional Shares.” Shares of TWC common stock held by TWC as treasury stock, held by direct or indirect wholly owned subsidiaries of TWC or Charter (other than Merger Subsidiary One) or held by Liberty Broadband or Liberty Interactive will not receive the foregoing merger consideration. Liberty Broadband and Liberty Interactive will only receive shares of New Charter Class A common stock as a result of the three mergers, subject to the terms of the Liberty contribution agreement as described in more detail under “Other Agreements—Liberty Contribution Agreement.”

Based on the closing price of a share of Charter Class A common stock on NASDAQ on May 20, 2015, the trading day on which Charter’s offer to merge with TWC was based, the merger consideration payable to TWC stockholders represented approximately $195.71 in value for each share of TWC common stock, or approximately $200 in value for each share of TWC common stock based on the 60-trading day volume

 

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weighted average price of Charter Class A common stock ending on such date. Based on the closing price of a share of Charter Class A common stock on NASDAQ on [●], 2015, the most recent practicable trading day prior to the date of this joint proxy statement/prospectus, the merger consideration payable to TWC stockholders represented approximately $[●] in value for each share of TWC common stock in the case of the Option A Election or approximately $[●] in value for each share of TWC common stock in the case of the Option B Election. Because New Charter will issue a fixed number of shares of New Charter Class A common stock in exchange for each share of TWC common stock, the total value of the merger consideration that TWC stockholders will receive in the mergers will depend on the market price of shares of New Charter Class A common stock at the time the mergers are completed. The market price of shares of New Charter Class A common stock when TWC stockholders receive those shares after the mergers are completed could be greater than, less than or the same as the market price of equivalent shares of Charter Class A common stock on the date of this joint proxy statement/prospectus or at the time of the TWC special meeting.

 

Q: How do TWC stockholders elect between the two merger consideration options?

 

A: A form of election, which will be mailed to each holder of record of TWC common stock as of the close of business on the election form record date (as defined below), as well as to stockholders who purchase shares of TWC common stock subsequent to such date and prior to the election deadline (as defined below), if any, will allow record holders of TWC common stock to elect between the two merger consideration options in respect of each share of TWC common stock that they hold.

The “election deadline” will be 5:00 p.m., local time (in the city in which the exchange agent is located) on the date that Charter and TWC agree is 5 business days prior to the expected closing date. Charter and TWC will publicly announce the anticipated election deadline not more than 20 business days before, and at least 5 business days prior to, the election deadline.

TWC will mail a form of election not less than 20 business days prior to the anticipated election deadline. The “election form record date” will be the 10th business day prior to the mailing record date.

 

Q: What do TWC stockholders receive if they do not elect between the two merger consideration options?

 

A: If a TWC stockholder does not make or submit an election to receive one of the two merger consideration options, such TWC stockholder will only be entitled to receive the merger consideration pursuant to the Option A Election.

 

Q: What will happen to the shares of TWC common stock held in the TWC Savings Plan?

 

A: The trust relating to the TWC Savings Plan (the “TWC Savings Plan”) holds shares of TWC common stock (the “Stock Fund”). As of the date of this document, such shares are expected to convert into a mix of cash and New Charter Class A common stock as elected in connection with the mergers. The administrator of the TWC Savings Plan will provide TWC Savings Plan participants invested in the Stock Fund all required information regarding the method and effect of the conversion and election related to the mergers.

 

Q: What will Charter stockholders receive in the mergers?

 

A:

If the mergers are completed, each share of Charter Class A common stock outstanding immediately prior to the completion of the third merger will be converted into the right to receive 0.9042 shares of New Charter Class A common stock. In addition, Charter stockholders will receive cash in lieu of any fractional shares of New Charter Class A common stock as a result of the mergers, as described under “Merger Agreement—Fractional Shares.” The three mergers described in this joint proxy statement/prospectus, including the merger of Charter and Merger Subsidiary Three, are intended to facilitate the combination of TWC and Charter, as well as the completion of the BHN transactions. The Parent Merger Exchange Ratio will also be

 

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  applied to the stock portion of the merger consideration to be received by the TWC stockholders and, therefore the exchange of shares of Charter for New Charter as described above will not impact the aggregate value represented by the shares of New Charter Class A common stock to be received by stockholders of Charter upon completion of the mergers.

 

Q: As a current employee and holder of options issued by TWC to purchase shares of TWC common stock, or a holder of TWC restricted stock units, what will I receive in the mergers?

 

A: Upon the completion of the second merger, each outstanding option awarded by TWC, whether or not exercisable or vested (but excluding any options held by a former employee of TWC, as described in the immediately succeeding answer), to purchase shares of TWC common stock will be converted into an option to purchase the number of shares of New Charter Class A common stock equal to the product of (x) the number of shares of TWC common stock subject to such option immediately prior to the completion of the first merger multiplied by (y) the Stock Award Exchange Ratio (as defined below), with any fractional shares rounded down to the next lower whole share of New Charter Class A common stock. The exercise price per share of New Charter Class A common stock for such option will be equal to the quotient of (i) the exercise price per share of such option immediately prior to the completion of the first merger divided by (ii) the Stock Award Exchange Ratio, rounded up to the nearest whole cent. Such converted options will be subject to the same terms and conditions as were applicable to the corresponding TWC options immediately prior to the completion of the first merger. The Stock Award Exchange Ratio is determined based on the value a stockholder of TWC who made the Option A Election would receive upon the completion of the mergers. Accordingly, in the merger agreement, “Stock Award Exchange Ratio” is defined generally as the sum of (i) the product of (A) the Option A Base Exchange Ratio multiplied by (B) the Parent Merger Exchange Ratio and (ii) the product of (A) the quotient of (I) $100 divided by (II) the volume weighted average per-share price of Charter Class A common stock during the ten full trading days ending on (and including) the trading day preceding the closing date, multiplied by (B) the Parent Merger Exchange Ratio.

Upon the completion of the second merger, each outstanding TWC employee restricted stock unit award (but excluding any such units held by a current or former non-employee director or a former employee of TWC, as described in the immediately succeeding answer), will be converted into the right to acquire the number of shares of New Charter Class A common stock equal to the product of (x) the number of shares of TWC common stock underlying such award immediately prior to the completion of the first merger multiplied by (y) the Stock Award Exchange Ratio, with any fractional shares rounded down to the next lower whole share of New Charter Class A common stock. Such converted restricted stock units will be subject to the same terms and conditions as applied to the corresponding award immediately prior to the completion of the first merger.

See “The Merger Agreement—Treatment of TWC Equity Awards.”

 

Q: As a former employee and holder of options issued by TWC to purchase shares of TWC common stock or TWC restricted stock units, or as a non-employee director and holder of TWC deferred stock units, what will I receive in the mergers?

 

A:

Upon the completion of the second merger, each outstanding option awarded by TWC held by a former employee of TWC, whether or not exercisable or vested, to purchase shares of TWC common stock will be cancelled, and TWC will pay such former employee an amount in cash computed by first determining the number of shares of New Charter Class A common stock to which such former employee would be entitled as if his or her stock options were converted in accordance with the preceding answer, and then multiplying such number by the excess of (i) the quotient of (A) the closing price of a share of Charter Class A common stock on the trading day immediately preceding the first merger, divided by (B) the Parent Merger Exchange Ratio (such quotient, the “Charter Adjusted Closing Price”) over (ii) the exercise price per share of such option (determined in accordance with the preceding answer). All options held by a former employee of

 

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  TWC that have a converted per share exercise price equal to or exceeding the Charter Adjusted Closing Price will be immediately cancelled without any right to consideration. All cash payments will be reduced by applicable withholding taxes.

Upon completion of the second merger, each TWC restricted stock unit award (which includes deferred stock units held by non-employee directors) held by (x) a current or former non-employee director or (y) a former employee of TWC will be cancelled, and TWC will pay such holder an amount in cash computed by first determining the number of shares of New Charter Class A common stock to which such person would be entitled if his or her stock units were converted in accordance with the preceding answer, and then multiplying such number by the Charter Adjusted Closing Price. All cash payments will be reduced by applicable withholding taxes.

If any restricted stock unit held by a former employee is subject to 409A of the Code and such former employee is also a “specified individual” within the meaning of Section 409A of the Code, then no cash payment will be made in respect of such award and instead such award will be converted as set forth above.

See “The Merger Agreement—Treatment of TWC Equity Awards.”

 

Q: As a holder of options issued by Charter to purchase shares of Charter Class A common stock, or a holder of Charter restricted stock awards or restricted stock units, what will I receive in the mergers?

 

A: Upon completion of the third merger, each outstanding option, whether or not exercisable or vested, to purchase shares of Charter Class A common stock will be converted into an option to purchase the number of shares of New Charter Class A common stock equal to the product of (x) the number of shares of Charter Class A common stock subject to such option immediately prior to the completion of the third merger multiplied by (y) the Parent Merger Exchange Ratio, with any fractional shares rounded down to the next lower whole share of New Charter Class A common stock. The exercise price per share of New Charter Class A common stock will be equal to the quotient of (i) the exercise price of such option immediately prior to the completion of the third merger divided by (ii) the Parent Merger Exchange Ratio, rounded up to the nearest whole cent. Such converted options will be subject to the same terms and conditions as applied to the corresponding options immediately prior to completion of the third merger.

Upon completion of the third merger, each outstanding Charter restricted stock award will be converted into an award with respect to the number of shares of New Charter Class A common stock equal to the product of (x) the number of shares of Charter Class A common stock underlying such award immediately prior to completion of the third merger multiplied by (y) the Parent Merger Exchange Ratio, with any fractional shares rounded down to the next lower whole share of New Charter Class A common stock. Such converted restricted stock awards will be subject to the same terms and conditions as applied to the corresponding awards immediately prior to completion of the third merger.

Upon completion of the third merger, each outstanding Charter restricted stock unit, whether or not vested, will be converted into the right to acquire the number of shares of New Charter Class A common stock equal to the product of (x) the number of shares of Charter Class A common stock underlying such unit immediately prior to completion of the third merger multiplied by (y) the Parent Merger Exchange Ratio, with any fractional shares rounded down to the next lower whole share of New Charter Class A common stock. Such converted restricted stock units will be subject to the same terms and conditions as applied to the corresponding units immediately prior to completion of the third merger.

 

Q: What happens if the mergers are not completed?

 

A: If the mergers are not completed for any reason, TWC stockholders will not receive any consideration for their shares of TWC common stock. Instead, TWC will remain an independent public company and its common stock will continue to be listed and traded on the New York Stock Exchange.

The consummation of the BHN transactions is conditioned on the completion of the mergers. However, if the mergers are not completed, Charter and A/N may still be obligated to complete the BHN transactions in

 

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certain circumstances, as described under “The BHN Contribution Agreement” if the tail condition (which is described in greater detail under “The BHN Contribution Agreement—Conditions to the Completion of the Contribution) is satisfied. There can be no assurance that the BHN transactions will be completed if the mergers are not completed.

 

Q: What are TWC stockholders being asked to vote on?

 

A: TWC stockholders are being asked to vote on the following proposals:

 

    to approve the adoption of the merger agreement, pursuant to which, among other things, (i) Merger Subsidiary One will be first merged with and into TWC, with TWC continuing as the surviving corporation, and (ii) immediately thereafter TWC will be merged with and into Merger Subsidiary Two, with Merger Subsidiary Two continuing as the surviving entity and a wholly owned subsidiary of New Charter (we refer to this proposal as the “TWC mergers proposal”); and

 

    to approve, on an advisory (non-binding) basis, certain specified compensation that will or may be paid by TWC to its named executive officers in connection with the mergers (we refer to this proposal as the “TWC advisory compensation proposal”).

The approval of the adoption of the merger agreement by TWC stockholders is a condition to the obligations of TWC, Charter and New Charter to complete the mergers. The approval of the TWC advisory compensation proposal is not a condition to the obligations of TWC, Charter or New Charter to complete the mergers.

 

Q: Does the TWC board of directors recommend that TWC stockholders adopt the merger agreement?

 

A: Yes. The TWC board of directors unanimously determined that the merger agreement, the first merger, the second merger and the other transactions contemplated by the merger agreement are fair to and in the best interests of TWC’s stockholders and unanimously approved and declared advisable the merger agreement, the first merger, the second merger and the other transactions contemplated by the merger agreement. The TWC board of directors unanimously recommends that TWC stockholders vote “FOR” the approval of the adoption of the merger agreement at the TWC special meeting. See “The Transactions—TWC’s Reasons for the Mergers; Recommendation of the TWC Board of Directors.”

 

Q: What is the specified compensation and why are TWC stockholders being asked to vote on it?

 

A: The SEC has adopted rules that require TWC to seek an advisory (non-binding) vote on certain specified compensation that is tied to or based on the mergers and that will or may be paid by TWC to its named executive officers in connection with the mergers. This proposal is referred to in this joint proxy statement/prospectus as the “TWC Proposals—TWC Advisory Compensation Proposal.”

 

Q: Does the TWC board of directors recommend that TWC stockholders approve the TWC advisory compensation proposal?

 

A: Yes. The TWC board of directors unanimously recommends that TWC stockholders vote “FOR” the TWC advisory compensation proposal. See “TWC Proposal II: Advisory Vote On Certain Specified Compensation.”

 

Q: What happens if the TWC advisory compensation proposal is not approved?

 

A: Approval of the TWC advisory compensation proposal is not a condition to completion of the mergers. The vote is an advisory (non-binding) vote. If the mergers are completed, TWC may pay the specified compensation to its named executive officers in connection with the mergers even if TWC stockholders fail to approve the TWC advisory compensation proposal.

 

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Q: What TWC stockholder vote is required for the approval of each proposal at the TWC special meeting, and what happens if I abstain?

 

A: The following are the vote requirements for the proposals of TWC:

 

    TWC Mergers Proposal: The affirmative vote of holders of a majority of the outstanding shares of TWC common stock entitled to vote is required to adopt the merger agreement at the TWC special meeting at which a quorum is present. Accordingly, a TWC stockholder’s abstention from voting, the failure of a TWC stockholder who holds his or her shares in “street name” through a broker, bank, nominee or other holder of record to give voting instructions to that broker, bank, nominee or other holder of record or a TWC stockholder’s other failure to vote will have the same effect as a vote “AGAINST” the TWC mergers proposal.

 

    TWC Advisory Compensation Proposal: The affirmative vote of a majority of the votes cast at the TWC special meeting at which a quorum is present by holders of shares of TWC common stock is required to approve, on an advisory (non-binding) basis, the TWC advisory compensation proposal. An abstention is not considered a vote cast. Accordingly, assuming a quorum is present, a TWC stockholder’s abstention from voting, the failure of a TWC stockholder who holds his or her shares in “street name” through a broker, bank, nominee or other holder of record to give voting instructions to that broker, bank, nominee or other holder of record or a TWC stockholder’s other failure to vote will have no effect on the TWC advisory compensation proposal.

 

Q: What constitutes a quorum for the TWC special meeting?

 

A: A majority of the votes entitled to be cast for each proposal being present in person or represented by proxy constitutes a quorum for such proposal at the TWC special meeting. Abstentions will be deemed present for the purpose of determining the presence of a quorum. Shares of TWC common stock held in “street name” with respect to which the beneficial owner fails to give voting instructions to the broker, bank, nominee or other holder of record will not be deemed present at the TWC special meeting for the purpose of determining the presence of a quorum.

 

Q: Who is entitled to vote at the TWC special meeting, and how many votes does each holder of TWC common stock have?

 

A: All holders of TWC common stock who held shares as of the record date for the TWC special meeting (the close of business on [●], 2015) are entitled to receive notice of, and to vote at, the TWC special meeting, provided that those shares remain outstanding on the date of the TWC special meeting. As of the close of business on [●], 2015, there were [●] shares of TWC common stock outstanding. Each holder of TWC common stock is entitled to one vote for each share of TWC common stock owned as of the record date.

 

Q: When and where is the TWC special meeting?

 

A: The TWC special meeting will be held on [●], 2015, at [●], located at [●], at [●], local time.

 

Q: How do I vote my shares at the TWC special meeting?

 

A: Via the Internet or by Telephone

If you hold TWC shares directly in your name as a stockholder of record (that is, if your shares of TWC common stock are registered in your name with Computershare Shareowner Services, TWC’s transfer agent), you may vote via the Internet at www.proxyvote.com or by telephone by calling the toll-free number on the back of your proxy card. Votes submitted via the Internet or by telephone must be received by 11:59 p.m. (Eastern Time) on [●], 2015.

 

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If you hold TWC shares in “street name,” meaning through a broker, bank, nominee or other holder of record, you may vote via the Internet or by telephone only if Internet or telephone voting is made available by your broker, bank, nominee or other holder of record. Please follow the voting instructions provided by your broker, bank, nominee or other holder of record with these materials.

By Mail

If you hold TWC shares directly in your name as a stockholder of record (that is, if your shares of TWC common stock are registered in your name with Computershare Shareowner Services, TWC’s transfer agent), you will need to sign, date and mark your proxy card and return it using the postage-paid return envelope provided or return it to Vote Processing, c/o Broadridge Financial Solutions, Inc., 51 Mercedes Way, Edgewood, New York 11717. Broadridge Financial Solutions, Inc. must receive your proxy card no later than the close of business on [●], 2015.

If you hold TWC shares in “street name,” meaning through a broker, bank, nominee or other holder of record, to vote by mail, you will need to sign, date and mark the voting instruction form provided by your broker, bank, nominee or other holder of record with these materials and return it in the postage-paid return envelope provided. Your broker, bank, nominee or other holder of record must receive your voting instruction form in sufficient time to vote your shares.

In Person

If you hold TWC shares directly in your name as a stockholder of record (that is, if your shares of TWC common stock are registered in your name with Computershare Shareowner Services, TWC’s transfer agent), you may vote in person at the TWC special meeting. Stockholders of record also may be represented by another person at the TWC special meeting by executing a proper proxy designating that person and having that proper proxy be presented to the inspector of election with the applicable ballot at the TWC special meeting.

If you hold TWC shares in “street name,” meaning through a broker, bank, nominee or other holder of record, you must obtain a legal proxy from that institution and present it to the inspector of elections with your ballot to be able to vote in person at the TWC special meeting. To request a legal proxy, please contact your broker, bank, nominee or other holder of record.

Shares Held in TWC’s 401(k) Plan

Under the provisions of the trust relating to the TWC Savings Plan, Fidelity Management Trust Company, as trustee, is required to request your confidential instructions as to how your proportionate interests in the shares of TWC common stock held in the Stock Fund under the TWC Savings Plan is to be voted at the TWC special meeting. Your instructions to Fidelity Management Trust Company will not be divulged or revealed to anyone at TWC. If Fidelity Management Trust Company does not receive your instructions on or prior to 5:00 p.m. (Eastern Time) via a voting instruction card or 11:59 p.m. (Eastern Time) via the Internet or by telephone on [●], 2015, your interest will be voted at the TWC special meeting in the same proportion as other participants’ interests in the TWC Savings Plan for which Fidelity Management Trust Company has received voting instructions.

Please carefully consider the information contained in this joint proxy statement/prospectus and, whether or not you plan to attend the TWC special meeting, vote via the Internet, by telephone or by mail so that your shares will be voted in accordance with your wishes even if you later decide not to attend the TWC special meeting.

We encourage you to register your vote via the Internet or by telephone. If you attend the TWC special meeting, you may also submit your vote in person, in which case any votes that you previously submitted—whether via the Internet, by telephone or by mail—will be superseded by the vote that you cast at the TWC special meeting. To vote in person at the TWC special meeting, beneficial owners who hold shares in “street

 

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name” through a broker, bank, nominee or other holder of record will need to contact the broker, bank, nominee or other holder of record to obtain a legal proxy to bring to the meeting. Whether your proxy is submitted via the Internet, by telephone or by mail, if it is properly completed and submitted, and if you do not revoke it prior to or at the TWC special meeting, your shares will be voted at the TWC special meeting in the manner set forth in this joint proxy statement/prospectus or as otherwise specified by you. Again, you may vote via the Internet or by telephone until 11:59 p.m. (Eastern Time) on [●], 2015, or TWC’s agent must receive your paper proxy card by mail no later than the close of business on [●], 2015.

 

Q: If my shares of TWC common stock are held in “street name,” will my broker, bank, nominee or other holder of record automatically vote my shares for me?

 

A: No. If your shares of TWC common stock are held in “street name,” you must instruct the broker, bank, nominee or other holder of record on how to vote your shares. Your broker, bank, nominee or other holder of record will vote your shares only if you provide instructions on how to vote by filling out the voting instruction form sent to you by your broker, bank, nominee or other holder of record with this joint proxy statement/prospectus.

 

Q: How will my shares be represented at the TWC special meeting, and what will happen if I return my proxy card without indicating how to vote?

 

A: If you submit your proxy via the Internet, by telephone or by mail, the officers named on your proxy card will vote your shares in the manner you requested if you correctly submitted your proxy. If you sign your proxy card and return it without indicating how to vote on any particular proposal, the shares of TWC common stock represented by your proxy will be voted in favor of that proposal.

 

Q: Who may attend the TWC special meeting?

 

A: TWC stockholders as of the record date (the close of business on [●], 2015), or their authorized representatives, may attend the TWC special meeting. If you would like to attend the meeting, because of security procedures, you will need to register in advance to gain admission to the TWC special meeting. You can register by calling (866) 892-8925 toll-free or sending an email with your name and address to: ir@twcable.com by [●], 2015. In addition to registering in advance, you will be required to present government issued identification (e.g., driver’s license or passport) to enter the meeting. The meeting also will be audiocast live on the Internet at www.twc.com/investors. You may not appoint more than three persons to act as your proxy at the meeting.

If you are a beneficial owner of shares of TWC common stock held in “street name” by a broker, bank, nominee or other holder of record as of the record date (the close of business on [●], 2015), in addition to proper identification, you will also need proof of ownership as of the record date to be admitted to the TWC special meeting. A brokerage statement or letter from a bank or broker are examples of proof of ownership. If you want to vote your shares of TWC common stock held in “street name” in person at the TWC special meeting, you will have to obtain a legal proxy in your name from the broker, bank, nominee or other holder of record who holds your shares.

TWC stockholders may contact TWC’s Investor Relations Department toll-free at (877) 446-3689 to obtain directions to the location of the TWC special meeting.

 

Q: What will happen if TWC stockholders abstain from voting, fail to vote or do not direct how to vote on their proxy?

 

A: Your vote is very important. The mergers cannot be completed unless TWC stockholders adopt the merger agreement.

For TWC stockholders, an abstention or failure to vote will have the same effect as a vote “AGAINST” the approval of the adoption of the merger agreement. In addition, if a TWC stockholder holds shares of TWC

 

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common stock in “street name” through a broker, bank, nominee or other holder of record and the stockholder does not give voting instructions to that broker, bank, nominee or other holder of record, that broker, bank, nominee or other holder of record will not be able to vote the shares on the approval of the adoption of the merger agreement, and such failure to give those instructions will have the same effect as a vote “AGAINST” the approval of the adoption of the merger agreement.

The TWC board of directors unanimously recommends that TWC stockholders vote “FOR” the approval of the adoption of the merger agreement.

 

Q. Can I revoke my proxy or change my voting instructions with respect to the TWC special meeting?

 

A: Yes. You may revoke your proxy or change your vote at any time before your proxy is voted at the TWC special meeting. If you are a stockholder of record as of the record date (the close of business on [●], 2015), you can revoke your proxy or change your vote by:

 

    sending a signed notice stating that you revoke your proxy to the General Counsel of TWC, at TWC’s offices at 60 Columbus Circle, New York, New York 10023, Attention: General Counsel, that bears a date later than the date of the proxy you want to revoke and is received prior to the TWC special meeting;

 

    submitting a valid, later-dated proxy by mail that is received prior to the TWC special meeting, or via the Internet or by telephone before 11:59 p.m. (Eastern Time) on [●], 2015, if you are a TWC stockholder; or

 

    attending the TWC special meeting (or, if the TWC special meeting is adjourned or postponed, attending the adjourned or postponed meeting) and voting in person, which will automatically cancel any proxy previously given, or revoking your proxy in person, but your attendance alone will not revoke any proxy previously given.

If you hold your shares in “street name” through a broker, bank, nominee or other holder of record, you must contact your brokerage firm, bank, nominee or other holder of record to change your vote or obtain a legal proxy to vote your shares if you wish to cast your vote in person at the TWC special meeting.

 

Q: What happens if I sell my TWC shares after the record date but before the TWC special meeting?

 

A: The record date for the TWC special meeting (the close of business on [●], 2015) is earlier than the date of the TWC special meeting and earlier than the date that the mergers are expected to be completed. If you sell or otherwise transfer your shares of TWC common stock after the record date but before the date of the TWC special meeting, you will retain your right to vote at the TWC special meeting. However, you will not have the right to receive the applicable merger consideration to be received by TWC stockholders in the mergers. In order to receive the applicable merger consideration, you must hold your shares through completion of the mergers.

 

Q: What do I do if I receive more than one set of voting materials?

 

A: You may receive more than one set of voting materials, including multiple copies of this joint proxy statement/prospectus, the proxy card or the voting instruction form. This can occur if you hold your shares in more than one brokerage account, if you hold shares directly as a record holder and also in “street name,” or otherwise through another holder of record, and in certain other circumstances. In addition, if you are a holder of shares of both TWC common stock and Charter Class A common stock, you will receive one or more separate proxy cards or voting instruction cards for each company. If you receive more than one set of voting materials, please vote or return each set separately in order to ensure that all of your shares are voted.

 

Q: What if I hold shares in both TWC and Charter?

 

A:

If you are both a TWC stockholder and a Charter stockholder, you will receive separate packages of proxy materials from each company. A vote as a TWC stockholder for any of the proposals of TWC will not

 

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  constitute a vote as a Charter stockholder to approve any of the proposals of Charter, or vice versa. Therefore, please sign, date, mark and return all proxy cards and/or voting instructions that you receive from TWC or Charter, or submit them over the Internet or by telephone.

 

Q: What are Charter stockholders being asked to vote on?

 

A: Charter stockholders are being asked to vote on the following proposals:

 

    to approve the adoption of the merger agreement pursuant to which, among other things, (i) TWC will be merged with and into Merger Subsidiary Two, with Merger Subsidiary Two continuing as the surviving entity and a wholly owned subsidiary of New Charter and (ii) Charter will be merged with and into Merger Subsidiary Three, with Merger Subsidiary Three continuing as the surviving entity and a wholly owned subsidiary of New Charter (we refer to this proposal as the “Charter merger proposal”);

 

    to approve the issuance of Class A common stock, par value $0.001 per share, of New Charter in connection with the mergers contemplated by the merger agreement (we refer to this proposal as the “TWC transactions stock issuance proposal”);

 

    to approve the issuance of (i) a newly created Class B common stock, par value $0.001 per share, of New Charter or Charter, as applicable, and (ii) common units and preferred units of Charter Holdings (including shares of Class A common stock of New Charter or Charter, as applicable, which may be issued upon conversion or exchange of such common units or preferred units), in each case in connection with the BHN transactions (we refer to this proposal as the “BHN transactions stock issuance proposal” and together with the TWC transactions stock issuance proposal, the “stock issuances proposals”);

 

    to approve the BHN/Liberty stockholders agreement (including the issuance of shares of New Charter or Charter Class A common stock to Liberty Broadband thereunder), the Liberty investment agreement (including the issuance of New Charter Class A common stock to Liberty Broadband thereunder), the Liberty contribution agreement and other transactions contemplated by the merger agreement and the foregoing agreements with Liberty Broadband and Liberty Interactive, as required by Charter’s existing certificate of incorporation (we refer to this proposal as the “Liberty transactions proposal”);

 

    to approve the adoption of the amended and restated certificate of incorporation (which will include the creation of the new class of Class B common stock of New Charter or Charter, as applicable) that will either be the amended and restated certificate of incorporation of New Charter if the TWC transactions are consummated or the amended and restated certificate of incorporation of Charter if the TWC transactions are not consummated but the BHN transactions are consummated (we refer to this proposal as the “general certificate of incorporation proposal”);

 

    to approve separately a feature of the amended and restated certificate of incorporation of New Charter or Charter, as applicable, that will provide that the special approval requirements for certain business combination transactions contained in Article Eighth of Charter’s existing certificate of incorporation will only be effective upon the termination of the BHN contribution agreement and will not apply to any transaction agreed or consummated prior to such time (we refer to this proposal as the “certificate of incorporation feature proposal 1”);

 

    to approve separately a feature of the amended and restated certificate of incorporation of New Charter or Charter, as applicable, that will set forth the size and composition requirements for the board of directors that are required by the BHN/Liberty stockholders agreement (we refer to this proposal as the “certificate of incorporation feature proposal 2”);

 

    to approve separately a feature of the amended and restated certificate of incorporation of New Charter or Charter, as applicable, that will specify standards for decisions by the board of directors that are required by the BHN/Liberty stockholders agreement (we refer to this proposal as the “certificate of incorporation feature proposal 3”);

 

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    to approve separately a feature of the amended and restated certificate of incorporation of New Charter or Charter, as applicable, that will provide for certain voting restrictions on Liberty Broadband and A/N as required by the BHN/Liberty stockholders agreement (we refer to this proposal as the “certificate of incorporation feature proposal 4,” and together with the general certificate of incorporation proposal and the certificate of incorporation feature proposals 1, 2 and 3, the “certificate of incorporation proposals”); and

 

    to approve, on an advisory (non-binding) basis, certain specified compensation that will or may be paid by Charter to its named executive officers in connection with the transactions (we refer to this proposal as the “Charter advisory compensation proposal”).

The approval of the Charter merger proposal, the TWC transactions stock issuance proposal, the Liberty transactions proposal and each of the certificate of incorporation proposals are conditions to the obligations of TWC, Charter and New Charter to complete the mergers. In addition, the approval of the BHN transactions stock issuance proposal, the Liberty transactions proposal (as it relates to the BHN/Liberty stockholders agreement and the stock issuance to Liberty Broadband in connection with the BHN transactions) and each of the certificate of incorporation proposals are conditions to the obligations New Charter, Charter and A/N to complete the BHN transactions. The approval of the Charter advisory compensation proposal is not a condition to the obligations of TWC, Charter or New Charter to complete the mergers and is not a condition to the obligations of Charter, New Charter or A/N to complete the BHN transactions.

The approval of each of the certificate of incorporation proposals is required to approve the adoption of the amended and restated certificate of incorporation. The amended and restated certificate of incorporation will not be filed and become effective if any of the certificate of incorporation proposals is not approved by Charter stockholders. The approval of all of the certificate of incorporation proposals shall constitute the requisite approval of the adoption of the amended and restated certificate of incorporation as required by Delaware law.

 

Q: Does the Charter board of directors recommend that Charter stockholders approve the Charter merger proposal, each of the stock issuances proposals, the Liberty transactions proposal and each of the certificate of incorporation proposals?

 

A: Yes. The members of the Charter board of directors unanimously determined that the merger agreement, the mergers, the stock issuances, the Liberty transactions, the amendments to the certificate of incorporation, the BHN transactions and the other transactions contemplated by the merger agreement, the Liberty agreements and the BHN contribution agreement are fair to and in the best interests of Charter and its stockholders and unanimously approved and declared advisable each of the merger agreement and the mergers and the amendments to the certificate of incorporation, and unanimously approved the stock issuances, the Liberty transactions, the BHN transactions and the other transactions contemplated by the merger agreement, the Liberty agreements and the BHN contribution agreement. In addition, the members of the Charter board of directors (other than the directors affiliated with Liberty Broadband) unanimously determined that the Liberty transactions are fair to and in the best interests of Charter and its stockholders and unanimously approved and declared advisable the Liberty transactions. The Charter board of directors unanimously recommends that Charter stockholders vote “FOR” the approval of the Charter merger proposal, “FOR” the approval of each of the stock issuances proposals, “FOR” the approval of the Liberty transactions proposal and “FOR” the approval of each of the certificate of incorporation proposals. See “The Transactions—Charter’s Reasons for the Mergers and Other Transactions; Recommendation of the Charter Board of Directors.”

 

Q: What is the specified compensation and why are Charter stockholders being asked to vote on it?

 

A:

The SEC has adopted rules that require Charter to seek an advisory (non-binding) vote on certain specified compensation that is tied to or based on the transactions and that will or may be paid by Charter to its named

 

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  executive officers in connection with the transactions. This proposal is referred to in this joint proxy statement/prospectus as the “Charter advisory compensation proposal.”

 

Q: Does the Charter board of directors recommend that Charter stockholders approve the Charter advisory compensation proposal?

 

A: Yes. The Charter board of directors unanimously recommends that Charter stockholders vote “FOR” the Charter advisory compensation proposal. See “Charter Proposals—Charter Proposal X: Advisory Vote On Certain Specified Compensation.”

 

Q: What happens if the Charter advisory compensation proposal is not approved?

 

A: Approval of the Charter advisory compensation proposal is not a condition to completion of the mergers or the BHN transactions. The vote is an advisory (non-binding) vote. If the transactions are completed, Charter may pay the specified compensation to its named executive officers in connection with the transactions even if Charter stockholders fail to approve the Charter advisory compensation proposal.

 

Q: What Charter stockholder vote is required for the approval of each proposal at the Charter special meeting, and what happens if I abstain?

 

A: The following are the vote requirements for the proposals of Charter:

 

    Charter Merger Proposal: The affirmative vote of holders of a majority of the outstanding shares of Charter Class A common stock entitled to vote at the Charter special meeting at which a quorum is present and, with respect to the second merger, the affirmative vote of holders of a majority of the outstanding shares of Charter Class A common stock (excluding shares beneficially owned by Liberty Broadband and its affiliates and associates) entitled to vote at the Charter special meeting at which a quorum is present are required to adopt the merger agreement. Accordingly, a Charter stockholder’s abstention from voting, the failure of a Charter stockholder who holds his or her shares in “street name” through a broker, bank, nominee or other holder of record to give voting instructions to that broker, bank, nominee or other holder of record or a Charter stockholder’s other failure to vote will have the same effect as a vote against the Charter merger proposal.

 

    Stock Issuances Proposals: The affirmative vote of a majority of the votes cast at the Charter special meeting at which a quorum is present by holders of shares of Charter Class A common stock is required to approve each of the stock issuances proposals. An abstention is not considered a vote cast. Accordingly, assuming a quorum is present, a Charter stockholder’s abstention from voting, the failure of a Charter stockholder who holds his or her shares in “street name” through a broker, bank, nominee or other holder of record to give voting instructions to that broker, bank, nominee or other holder of record or a Charter stockholder’s other failure to vote will have no effect on the applicable stock issuances proposal.

 

    Liberty Transactions Proposal: The affirmative vote of holders of a majority of the outstanding shares of Charter Class A common stock (excluding shares of Charter Class A common stock beneficially owned by Liberty Broadband and its affiliates and associates) entitled to vote at the Charter special meeting at which a quorum is present is required to approve the Liberty transactions in accordance with Charter’s certificate of incorporation, and the affirmative vote of a majority of the votes cast by holders of shares of Charter Class A common stock is required to approve the Liberty transactions proposal (with respect to stock issuances to Liberty Broadband) at the Charter special meeting at which a quorum is present. Accordingly, given the dual-voting requirement, a Charter stockholder’s abstention from voting, the failure of a Charter stockholder who holds his or her shares in “street name” through a broker, bank, nominee or other holder of record to give voting instructions to that broker, bank, nominee or other holder of record or a Charter stockholder’s other failure to vote will have the same effect as a vote against the Liberty transactions proposal.

 

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    Certificate of Incorporation Proposals: The affirmative vote of holders of a majority of the outstanding shares of Charter Class A common stock entitled to vote at the Charter special meeting at which a quorum is present and the affirmative vote of holders of a majority of the outstanding shares of Charter Class A common stock (excluding shares beneficially owned by Liberty Broadband and its affiliates and associates) entitled to vote at the Charter special meeting at which a quorum is present are required to approve each certificate of incorporation proposal at the Charter special meeting at which a quorum is present. Accordingly, given the dual-voting requirement, a Charter stockholder’s abstention from voting, the failure of a Charter stockholder who holds his or her shares in “street name” through a broker, bank, nominee or other holder of record to give voting instructions to that broker, bank, nominee or other holder of record or a Charter stockholder’s other failure to vote will have the same effect as a vote against the applicable certificate of incorporation proposals.

 

    Charter Advisory Compensation Proposal: The affirmative vote of a majority of the votes cast at the Charter special meeting at which a quorum is present by holders of shares of Charter Class A common stock is required to approve, on an advisory (non-binding) basis, the Charter advisory compensation proposal. An abstention is not considered a vote cast. Accordingly, assuming a quorum is present, a Charter stockholder’s abstention from voting, the failure of a Charter stockholder who holds his or her shares in “street name” through a broker, bank, nominee or other holder of record to give voting instructions to that broker, bank, nominee or other holder of record or a Charter stockholder’s other failure to vote will have no effect on the Charter advisory compensation proposal.

The approval of each of the Charter merger proposal, the TWC transactions stock issuance proposal, the Liberty transactions proposal and each of the certificate of incorporation proposals are conditions to the obligations of TWC, New Charter and Charter to complete the mergers. However, for purposes of satisfying the conditions to the closing of the mergers, the certificate of incorporation proposals are required to be approved by a majority of the outstanding shares of Charter Class A common stock excluding shares beneficially owned by Liberty Broadband and its affiliates and associates. The approval of each of the BHN transactions stock issuance proposal, the Liberty transactions proposal (as it relates to the BHN/Liberty stockholders agreement and the stock issuance to Liberty Broadband in connection with the BHN transactions) and each of the certificate of incorporation proposals are conditions to the obligations of New Charter, Charter and A/N to complete the BHN transactions. Accordingly, Charter cannot complete the mergers (and in certain circumstances the BHN transactions) unless its stockholders approve the Charter merger proposal, the TWC transactions stock issuance proposal, the Liberty transactions proposal and each of the certificate of incorporation proposals as described above.

 

Q: What constitutes a quorum for the Charter special meeting?

 

A: The holders of a majority of the voting power of the Charter Class A common stock issued and outstanding and entitled to vote, present either in person or by proxy at the Charter special meeting, will constitute a quorum. Abstentions will be deemed present for the purpose of determining the presence of a quorum. Shares of Charter common stock held in “street name” with respect to which the beneficial owner fails to give voting instructions to the broker, bank, nominee or other holder of record will not be present at the Charter special meeting for the purpose of determining the presence of a quorum.

 

Q: Who is entitled to vote at the Charter special meeting, and how many votes does each holder of Charter Class A common stock have?

 

A:

All holders of Charter Class A common stock who held shares as of the record date for the Charter special meeting (the close of business on [●], 2015) are entitled to receive notice of, and to vote at, the Charter special meeting, provided that those shares remain outstanding on the date of the Charter special meeting. As of the close of business on [●], 2015, there were [●] shares of Charter Class A common stock outstanding. At the close of business on [●], 2015, there were no shares of Charter Class B common stock,

 

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  par value $0.001 per share, outstanding or entitled to vote at the Charter special meeting. Each holder of Charter Class A common stock is entitled to one vote for each share of Charter Class A common stock owned as of the record date.

 

Q: When and where is the Charter special meeting?

 

A: The Charter special meeting will be held on [●], 2015, at [●], located at [●], at [●], local time.

 

Q: How do I vote my shares at the Charter special meeting?

 

A: If you were a record holder of Charter Class A common stock as of the close of business on the record date of the Charter special meeting, a proxy card is enclosed for your use. Charter requests that you submit your proxy to vote your shares as promptly as possible by (i) accessing the Internet site listed on the proxy card, (ii) calling the toll-free number listed on the proxy card or (iii) submitting your proxy card by mail by using the provided self-addressed, stamped envelope. Information and applicable deadlines for voting through the Internet or by telephone are set forth on the enclosed proxy card. When the accompanying proxy is returned properly executed, the shares of Charter Class A common stock represented by it will be voted at the Charter special meeting or any adjournment or postponement thereof in accordance with the instructions contained in the proxy card. Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner as if you had marked, signed and returned a proxy card. When a stockholder submits a proxy via the Internet or by telephone, his or her proxy is recorded immediately. We encourage you to register your vote via the Internet or by telephone whenever possible. If you submit a proxy via the Internet or by telephone, please do not return your proxy card by mail. If you attend the meeting, you may also submit your vote in person. Any votes that you previously submitted—whether via the Internet, by telephone or by mail—will be superseded by any vote that you cast at the Charter special meeting or any vote that is submitted by you subsequent to the date of the previous submission.

Your vote is very important, regardless of the number of shares you own. Accordingly, if you were a record holder of Charter Class A common stock as of the record date of the special meeting, please sign and return the enclosed proxy card or vote via the Internet or telephone whether or not you plan to attend the special meeting in person. Proxies submitted through the specified Internet website or by phone must be received by 11:59 p.m. (Eastern Time), on [], 2015. If your shares are held in the name of a bank, broker, nominee or other record holder, please follow the instructions on the voting instruction form furnished to you by such record holder.

If your broker, bank or other nominee holds your shares of Charter Class A common stock in street name, you must either direct your nominee on how to vote your shares or obtain a proxy from your nominee to vote in person at the Charter special meeting. Please check the voting form used by your nominee for information on how to submit your instructions to them.

 

Q: If my Charter shares are held in “street name,” will my broker, bank, nominee or other holder of record automatically vote my shares for me?

 

A: No. Under NASDAQ rules, banks, brokers or other nominees who hold shares in street name for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. However, brokers are not allowed to exercise their voting discretion with respect to the approval of matters that NASDAQ determines to be “non-routine” without specific instructions from the beneficial owner. It is expected that all proposals to be voted on at the special meeting of Charter stockholders are such “non-routine” matters, and, therefore brokers do not have discretionary authority to vote on any of the proposals. Broker non-votes occur when a bank, broker or other nominee is not instructed by the beneficial owner of shares to vote on a particular proposal for which the broker does not have discretionary voting power.

 

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If you hold Charter shares in “street name” through a broker, bank, nominee or other holder of record, you may vote via the Internet or by telephone only if Internet or telephone voting is made available by your broker, bank, nominee or other holder of record. Please follow the voting instructions provided by your broker, bank, nominee or other holder of record with these materials.

If you hold Charter shares in “street name” through a broker, bank, nominee or other holder of record, to vote by mail, you will need to sign, date and mark the voting instruction form provided by your broker, bank, nominee or other holder of record and return it in the postage-paid return envelope provided. Your broker, bank, nominee or other holder of record must receive your voting instruction form in sufficient time to vote your shares.

If you hold Charter shares in “street name” through a broker, bank, nominee or other holder of record, you must obtain a legal proxy from that institution and present it to the inspector of elections with your ballot to be able to vote in person at the Charter special meeting. To request a legal proxy, please contact your broker, bank, nominee or other holder of record.

 

Q: How will my shares be represented at the Charter special meeting, and what will happen if I return my proxy card without indicating how to vote?

 

A: If you submit your proxy via the Internet, by telephone or by mail, the officers named on your proxy card will vote your shares in the manner you requested if you correctly submitted your proxy. If you sign your proxy card and return it without indicating how to vote on any particular proposal, the shares of Charter Class A common stock represented by your proxy will be voted in favor of that proposal.

 

Q: Who may attend the Charter special meeting?

 

A: Charter stockholders as of the record date (the close of business on [●], 2015), or their authorized representatives, may attend the Charter special meeting. If you hold shares in your name as of the record date, please be prepared to provide proper identification, such as a driver’s license, to gain admission to the Charter special meeting.

If you are a beneficial owner of shares of Charter Class A common stock held in “street name” by a broker, bank, nominee or other holder of record as of the record date (the close of business on [●], 2015), in addition to proper identification, you will also need proof of ownership as of the record date to be admitted to the Charter special meeting. A brokerage statement or letter from a bank or broker are examples of proof of ownership. If you want to vote your shares of Charter Class A common stock held in “street name” in person at the Charter special meeting, you will have to obtain a legal proxy in your name from the broker, bank, nominee or other holder of record who holds your shares.

 

Q: What will happen if Charter stockholders abstain from voting, fail to vote or do not direct how to vote on their proxy?

 

A: Your vote is very important. The mergers cannot be completed unless Charter stockholders adopt the merger agreement and approve the TWC transactions stock issuance proposal, the Liberty transactions proposal (including the issuance of shares of New Charter Class A common stock to Liberty Broadband pursuant to the Liberty investment agreement and the BHN/Liberty stockholders agreement and the other provisions of the BHN/Liberty stockholders agreement) and each of the certificate of incorporation proposals. The BHN transactions cannot be completed unless Charter stockholders adopt the merger agreement (except in certain circumstances) and approve the BHN transactions stock issuance proposal, the Liberty transactions proposal (including the issuance of shares to Liberty Broadband pursuant to the BHN/Liberty stockholders agreement and the other provisions of the BHN/Liberty stockholders agreement) and each of the certificate of incorporation proposals.

For Charter stockholders, an abstention or failure to vote will have the same effect as a vote “AGAINST” the approval of the adoption of the merger agreement, a vote “AGAINST” the approval of the Liberty transactions proposal and a vote “AGAINST” each of the certificate of incorporation proposals. In addition,

 

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if a Charter stockholder holds shares of Charter Class A common stock in “street name” through a broker, bank, nominee or other holder of record and the stockholder does not give voting instructions to that broker, bank, nominee or other holder of record, that broker, bank, nominee or other holder of record will not be able to vote the shares on the Charter merger proposal, the Liberty transactions proposal and any of the certificate of incorporation proposals, and such failure to give those instructions will have the same effect as a vote “AGAINST” such proposals. With respect to each of the stock issuances proposals, assuming a quorum is present, a Charter stockholder’s abstention from voting, the failure of a Charter stockholder who holds his or her shares in “street name” through a broker, bank, nominee or other holder of record to give voting instructions to that broker, bank, nominee or other holder of record or a Charter stockholder’s other failure to vote will have no effect on the applicable stock issuances proposal.

The Charter board of directors unanimously recommends that Charter stockholders vote “FOR” the approval of the Charter merger proposal, “FOR” each of the stock issuances proposals, “FOR” the approval of the Liberty transactions proposal and “FOR” the approval of each of the certificate of incorporation proposals.

 

Q. Can I revoke my proxy or change my voting instructions with respect to the Charter special meeting?

 

A: Yes. You may revoke your proxy or change your vote at any time before your proxy is voted at the Charter special meeting. If you are a stockholder of record as of the record date (the close of business on [●], 2015), you can revoke your proxy or change your vote by:

 

    sending a written notice that is received prior to the Charter special meeting stating that you revoke your proxy to the corporate secretary of Charter at 400 Atlantic Street, Stamford, Connecticut 06901 that bears a date later than the date of the proxy you want to revoke;

 

    properly completing, signing and dating a new proxy card bearing a later date and properly submitting it so that it is received prior to the Charter special meeting;

 

    visiting the website shown on the Charter proxy card and submitting a new proxy in the same manner that you would submit your proxy via the Internet or by calling the toll-free number shown on the proxy card to submit a new proxy by telephone; or

 

    attending the Charter special meeting (or if the Charter special meeting is adjourned or postponed, attending the adjourned or postponed meeting) in person and voting your shares.

If you hold your shares in “street name” through a broker, bank, nominee or other holder of record, you must contact your broker, bank, nominee or other holder of record to change your vote or obtain a legal proxy to vote your shares if you wish to cast your vote in person at the Charter special meeting.

 

Q: What happens if I sell my Charter shares after the record date but before the Charter special meeting?

 

A: The record date for the Charter special meeting (the close of business on [●], 2015) is earlier than the date of the Charter special meeting and earlier than the date that the mergers are expected to be completed. If you sell or otherwise transfer your shares of Charter Class A common stock after the record date but before the date of the Charter special meeting, you will retain your right to vote at the Charter special meeting. However, you will not have the right to receive the applicable merger consideration to be received by Charter stockholders in the mergers. In order to receive the applicable merger consideration, you must hold your shares through completion of the mergers.

 

Q: When do you expect to complete the mergers, the BHN transactions and the Liberty transactions?

 

A:

As of the date of this joint proxy statement/prospectus, we expect to complete the mergers, the BHN transactions and the Liberty transactions by the end of 2015 due to our current expectations regarding the timing of certain regulatory approvals, subject to satisfaction (or, to the extent permissible, waiver) of the

 

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  conditions to the parties’ obligations to complete the mergers, the BHN transactions and/or the Liberty transactions, as applicable. However, no assurance can be given as to when, or if, the mergers, the BHN transactions and/or the Liberty transactions will be completed.

 

Q: Are the mergers expected to be taxable to TWC or Charter stockholders?

 

A: Charter and TWC intend for the payment of cash to a holder of shares of TWC common stock in the first merger to be treated as a distribution in partial redemption of such shares subject to the provisions of Section 302(a) of the Code, though this treatment is not free from doubt. In such case, a U.S. holder of shares of TWC common stock will generally recognize gain or loss equal to the difference between the amount of cash received in the first merger (including any cash received in lieu of fractional shares of TWC common stock) and the adjusted tax basis of the shares treated as exchanged for cash. However, U.S. holders who actually or constructively own New Charter Class A common stock other than New Charter Class A common stock received pursuant to the second merger may be treated as having received a dividend instead of having sold or exchanged a portion of their shares of TWC common stock. The cash that a non-U.S. holder of shares of TWC common stock receives generally will be subject to withholding of U.S. federal income tax at a rate of 30%, subject to reduction, exemption, or the availability of a refund if specific requirements are met. However, alternative characterizations are possible.

Charter and TWC intend for each of the second merger and the third merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Accordingly, U.S. holders of shares of the surviving corporation of the first merger or shares of Charter Class A common stock will generally not be subject to U.S. federal income tax as a result of the exchange of such shares for shares of New Charter Class A common stock (except in connection with cash received in lieu of a fractional share of New Charter Class A common stock in the third merger) in the second merger and the third merger, respectively.

Holders of shares of TWC common stock and Charter Class A common stock should read the section titled “Material U.S. Federal Income Tax Consequences of the Mergers” for a more complete discussion of the U.S. federal income tax consequences of the mergers. In addition, all holders of TWC common stock and Charter Class A common stock are urged to consult with their tax advisors regarding the tax consequences of the mergers to them, including the effects of U.S. federal, state and local, non-U.S. and other tax laws.

 

Q: Do TWC or Charter stockholders have appraisal rights?

 

A: Subject to the closing of the first merger, record holders of TWC common stock who do not vote in favor of the approval of the adoption of the merger agreement and otherwise comply fully with the requirements and procedures of Section 262 of the DGCL may exercise their rights of appraisal, which generally entitle stockholders to receive a cash payment equal to the fair value of their TWC common stock exclusive of any element of value arising from the accomplishment or expectation of the mergers. A detailed description of the appraisal rights and procedures available to TWC stockholders is included in “Dissenters’ Rights to Appraisal.” The full text of Section 262 of the DGCL is attached as Annex P to this joint proxy statement/prospectus.

Charter stockholders do not have appraisal rights in connection with the third merger or any other transaction described in this joint proxy statement/prospectus.

 

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Q: If I am a TWC stockholder, whom should I call with questions?

 

A: If you have any questions about the mergers or the TWC special meeting, or desire additional copies of this joint proxy statement/prospectus, proxy cards or voting instruction forms, you should contact:

MacKenzie Partners, Inc.

105 Madison Avenue

New York, New York 10016

Telephone Toll-Free: (800) 322-2885

Telephone Call Collect: (212) 929-5500

Email: proxy@mackenziepartners.com

or

Time Warner Cable Inc.

60 Columbus Circle

New York, New York 10023

Attention: Investor Relations

Telephone: (877) 446-3689

Email: ir@twcable.com

 

Q: If I am a Charter stockholder, whom should I call with questions?

 

A: If you have any questions about the mergers or the Charter special meeting, or desire additional copies of this joint proxy statement/prospectus, proxy cards or voting instruction forms, you should contact:

Innisfree M&A Incorporated

501 Madison Avenue, 20th floor

New York, New York 10222

Stockholders may call toll free: (888) 750-5834

Banks and Brokers may call collect: (212) 750-5833

or

Charter Communications, Inc.

400 Atlantic Street

Stamford, Connecticut 06901

Attention: Investor Relations

Telephone: (203) 905-7801

 

Q: Where can I find more information about TWC and Charter?

 

A: You can find more information about TWC and Charter from the various sources described under the heading “Where You Can Find More Information,” beginning on page [●] of this joint proxy statement/prospectus.

 

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SUMMARY

This summary highlights selected information from this joint proxy statement/prospectus. It may not contain all of the information that is important to you. You are urged to read carefully the entire joint proxy statement/prospectus and the other documents referred to or incorporated by reference into this joint proxy statement/prospectus in order to fully understand the merger agreement, the proposed mergers, the Liberty transactions and the BHN transactions. See “Where You Can Find More Information,” beginning on page [●] of this joint proxy statement/prospectus. Each item in this summary refers to the page of this joint proxy statement/prospectus on which that subject is discussed in more detail.

The Companies (See Page [])

Charter Communications, Inc.

Charter is among the largest providers of cable services in the United States, offering a variety of entertainment, information and communications solutions to residential and commercial customers. Charter’s infrastructure consists of a hybrid of fiber and coaxial cable plant with approximately 12.9 million estimated passings, with 97% at 550 megahertz or greater and 98% of plant miles two-way active. A national Internet Protocol (IP) infrastructure interconnects Charter markets.

As of March 31, 2015, Charter served approximately 6.3 million residential and commercial customers. Charter sells its video, Internet and voice services primarily on a subscription basis, often in a bundle of two or more services, providing savings and convenience to its customers. Bundled services are available to approximately 98% of Charter’s passings, and approximately 62% of Charter’s customers subscribe to a bundle of services.

Charter was incorporated as a Delaware corporation on July 22, 1999. The principal trading market for Charter common stock (NASDAQ: CHTR) is the NASDAQ. Charter’s principal executive offices are located at 400 Atlantic Street, Stamford, Connecticut 06901. Charter’s telephone number is (203) 905-7801, and its website accessible at www.charter.com.

This joint proxy statement/prospectus incorporates important business and financial information about Charter from other documents that are not included in or delivered with this joint proxy statement/prospectus. For a list of the documents that are incorporated by reference, see “Where You Can Find More Information,” beginning on page [●] of this joint proxy statement/prospectus.

CCH I, LLC

New Charter is a Delaware limited liability company and a wholly owned subsidiary of Charter. New Charter was organized as a Delaware limited liability company on June 9, 2003. New Charter will be converted into a Delaware corporation immediately prior to the completion of the mergers.

New Charter’s principal executive offices are located at 400 Atlantic Street, Stamford, Connecticut 06901. New Charter’s telephone number is (203) 905-7801.

Merger Subsidiary One

Merger Subsidiary One is a Delaware corporation, and formed solely for the purpose of implementing the mergers. Merger Subsidiary One was organized as a Delaware corporation on May 22, 2015. It has not carried on any activities or operations to date, except for those activities incidental to its organization and undertaken in connection with the transactions contemplated by the merger agreement.

 

 

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Merger Subsidiary One’s principal executive offices are located at 400 Atlantic Street, Stamford, Connecticut 06901. Merger Subsidiary One’s telephone number is (203) 905-7801.

Merger Subsidiary Two

Merger Subsidiary Two is a Delaware limited liability company and a wholly owned subsidiary of Charter, formed solely for the purpose of implementing the mergers. Merger Subsidiary Two was formed as a Delaware limited liability company on May 22, 2015. It has not carried on any activities or operations to date, except for those activities incidental to its formation and undertaken in connection with the transactions contemplated by the merger agreement.

Merger Subsidiary Two’s principal executive offices are located at 400 Atlantic Street, Stamford, Connecticut 06901. Merger Subsidiary Two’s telephone number is (203) 905-7801.

Merger Subsidiary Three

Merger Subsidiary Three is a Delaware limited liability company and a wholly owned subsidiary of Charter, formed solely for the purpose of implementing the mergers. Merger Subsidiary Three was formed as a Delaware limited liability company on May 22, 2015. It has not carried on any activities or operations to date, except for those activities incidental to its formation and undertaken in connection with the transactions contemplated by the merger agreement.

Merger Subsidiary Three’s principal executive offices are located at 400 Atlantic Street, Stamford, Connecticut 06901. Merger Subsidiary Three’s telephone number is (203) 905-7801.

Time Warner Cable Inc.

TWC is among the largest providers of video, high-speed data and voice services in the United States, with technologically advanced, well-clustered cable systems located mainly in five geographic areas—New York State (including New York City), the Carolinas, the Midwest (including Ohio, Kentucky and Wisconsin), Southern California (including Los Angeles) and Texas. TWC’s mission is to connect its customers to the world—simply, reliably and with superior service. As of March 31, 2015, TWC served approximately 15.4 million residential and business services customers who subscribed to one or more of its video, high-speed data and voice services. In addition, TWC’s residential services include security and home management services, and TWC’s business services include networking and transport services (including cell tower backhaul services) and enterprise-class, cloud-enabled hosting, managed applications and services. TWC also sells video and online advertising inventory to a variety of local, regional and national customers.

TWC was incorporated as a Delaware corporation on March 21, 2003, and TWC and its predecessors have been in the cable business for over 40 years in various legal forms. The principal trading market for TWC common stock (NYSE: TWC) is the New York Stock Exchange. TWC’s principal executive offices are located at 60 Columbus Circle, New York, New York 10023. TWC’s telephone number is (212) 364-8200, and its website is accessible at www.twc.com.

This joint proxy statement/prospectus incorporates important business and financial information about TWC from other documents that are not included in or delivered with this joint proxy statement/prospectus. For a list of the documents that are incorporated by reference, see “Where You Can Find More Information,” beginning on page [●] of this joint proxy statement/prospectus.

 

 

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Bright House Networks, LLC

Bright House is a wholly owned subsidiary of Time Warner Entertainment-Advance/Newhouse (TWE-A/N). TWE-A/N is a partnership between A/N and a subsidiary of TWC. The Bright House systems are managed on a day to day basis by A/N, which is entitled to 100% of the economic benefits of Bright House. TWC and its affiliates provide Bright House with certain programming, engineering and technology services through a services agreement between the parties.

Bright House is a cable operator providing services in the United States with approximately 2.5 million residential and commercial customers as of March 31, 2015. Bright House’s business is concentrated in Florida with smaller operations in Michigan, Alabama, Indiana and California. Bright House provides its subscribers with video, Internet and voice services. Bright House also sells local advertising on cable networks.

Bright House was formed as a Delaware limited liability company on July 9, 2002. Bright House’s principal executive offices are located at 5823 Widewaters Parkway, East Syracuse, New York 13057. Bright House’s telephone number is (315) 463-7675, and its website is accessible at www.brighthouse.com.

The Mergers (See Page [])

The merger agreement provides for three mergers, following which both Charter and TWC will become wholly owned subsidiaries of New Charter. In the first merger (referred to in the merger agreement as the “First Company Merger”), Merger Subsidiary One will merge with and into TWC, with TWC continuing as the surviving corporation. Immediately following the completion of the first merger, in the second merger (referred to in the merger agreement as the “Second Company Merger”), TWC will merge with and into Merger Subsidiary Two, with Merger Subsidiary Two continuing as the surviving entity. Immediately following the completion of the second merger, in the third merger (referred to in the merger agreement as the “Parent Merger”), Charter will merge with and into Merger Subsidiary Three, with Merger Subsidiary Three continuing as the surviving entity. After giving effect to the three mergers, New Charter will be the new public company parent that will hold the operations of the combined companies.

Upon completion of the mergers, TWC common stock will be delisted from the New York Stock Exchange and deregistered under the Exchange Act.

A copy of the merger agreement is attached as Annex A to this joint proxy statement/prospectus. You should read the merger agreement carefully because it is the legal document that governs the mergers.

The BHN Transactions (See Page [])

On March 31, 2015, Charter, New Charter, Charter Holdings, A/N and A/NPC Holdings LLC entered into the BHN contribution agreement, which was amended on May 23, 2015 in connection with the execution of the merger agreement. Pursuant to the BHN contribution agreement, at the closing of the transactions contemplated by that agreement, A/N will contribute to Charter Holdings, a wholly owned subsidiary of Charter, the membership interests of BHN and any property, assets or other rights (other than certain excluded assets and liabilities and non-operating cash) that primarily relate to BHN’s business of directly or indirectly owning and operating cable and/or communication systems that provide customers with video, Internet and voice services and other cable communications and/or voice services in specified geographic areas and other revenue-generating activities of BHN and its subsidiaries, including any local news networks (collectively, the “BHN business”), or that are otherwise reflected on BHN’s audited financial statements for the fiscal year ended December 31, 2014 or the notes thereto. At the closing, Charter Holdings will pay to A/N approximately $2.0 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, if the mergers have not been consummated prior to the consummation

 

 

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of the BHN transactions, approximately 34.3 million common units of Charter Holdings. If the mergers have been consummated prior to the consummation of the BHN transactions, the number of common units to be issued by Charter Holdings to A/N will instead be approximately 31.0 million common units to take into account the Parent Merger Exchange Ratio, and the conversion ratio applicable to the convertible preferred units will also take into account the Parent Merger Exchange Ratio. In addition, New Charter will issue to A/N one share of New Charter Class B common stock, which will initially have a number of votes reflecting the voting power of the Charter Holdings common units (other than those owned by New Charter or Charter) and the convertible preferred units of Charter Holdings on an as-converted, as-exchanged basis, which voting rights are generally intended to reflect A/N’s economic interests in New Charter and Charter Holdings.

A copy of the BHN contribution agreement is attached as Annex B to this joint proxy statement/prospectus.

The Liberty Transactions (See Pages [], [] and [])

BHN/Liberty Stockholders Agreement (See Page [])

On May 23, 2015, in connection with the execution of the merger agreement and the amendment of the BHN contribution agreement, Charter and New Charter entered into the BHN/Liberty stockholders agreement with Liberty Broadband and A/N. The BHN/Liberty stockholders agreement will replace Charter’s existing stockholders agreement with Liberty Broadband, dated September 29, 2014, and supersede the amended and restated stockholders agreement among Charter, New Charter, Liberty Broadband and A/N, dated March 31, 2015. Charter’s existing stockholders agreement (as amended by the Liberty investment agreement) with Liberty Broadband will remain in effect until the closing of the BHN transactions or the mergers, whichever occurs earlier, and, in the event the BHN/Liberty stockholders agreement is terminated, will revive and continue in full force and effect. Certain provisions of the BHN/Liberty stockholders agreement became effective upon its execution.

Pursuant to the BHN/Liberty stockholders agreement and in connection with the BHN transactions, Liberty Broadband has agreed to purchase from New Charter or, if the mergers are not consummated prior to the completion of the BHN transactions, Charter, $700 million of New Charter Class A common stock or Charter Class A common stock, respectively, at the price per share of (i) if the mergers are consummated prior to the BHN transactions, $172.9963 divided by the Parent Merger Exchange Ratio, which is equal to approximately 3.66 million shares of New Charter Class A common stock, or (ii) if the mergers are not consummated prior to the completion of the BHN transactions, $172.9963, which is equal to approximately 4.05 million shares of Charter Class A Common Stock. In addition, Liberty Broadband has agreed that it and its affiliates will vote all of their respective shares of Charter Class A common stock in favor of the transactions and matters contemplated by the BHN contribution agreement, the BHN/Liberty stockholders agreement and the merger agreement at Charter’s special meeting of stockholders to be held for this purpose.

Under the terms of the BHN/Liberty stockholders agreement, the number of New Charter directors will be fixed at 13, which will include New Charter’s chief executive officer. Upon the closing of the BHN transactions, two designees selected by A/N and three designees selected by Liberty Broadband will become members of the board of directors of New Charter. The remaining eight directors (other than the chief executive officer who is expected to become the chairman of the board) will be independent directors selected by the nominating committee of the New Charter board of directors upon approval of both a majority of the nominating committee and a majority of the directors that were not appointed by either A/N or Liberty Broadband. Thereafter, Liberty Broadband will be entitled to designate three nominees to be elected as directors (as long as it maintains at least a 20% voting or equity ownership interest in New Charter) and A/N will be entitled to designate two nominees to be elected as directors (as long as it maintains at least a 11% voting or equity ownership interest in New Charter), provided that each director nominee meets certain applicable requirements or qualifications. Each of A/N and Liberty Broadband will be entitled to nominate at least one director to each of the committees of the New Charter

 

 

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board of directors, subject to applicable stock exchange listing rules and certain specified voting or equity ownership thresholds for each of A/N and Liberty Broadband, and provided that the nominating and compensation committees will have at least a majority of directors independent from A/N, Liberty Broadband and New Charter (referred to as the “unaffiliated directors”). The nominating committee will be comprised of three unaffiliated directors, and one designee of each of A/N and Liberty Broadband. A/N and Liberty Broadband also will have certain other committee designation and other governance rights. Mr. Thomas Rutledge will be offered the positions of CEO and chairman of New Charter with a new five-year employment agreement to be negotiated prior to the closing of the mergers or the BHN transactions, and in the event that Mr. Rutledge does not agree to serve as the chairman then the parties to the BHN/Liberty stockholders agreement will mutually agree on the appointment of a new chairman. The chairman of the board must be independent (as defined in the BHN/Liberty stockholders agreement) from each of Liberty Broadband and A/N, and each of Liberty Broadband and A/N have the right in certain circumstances to have a director designee on any committee formed to search for a CEO candidate or to nominate a chairman of the board.

Each of A/N and Liberty Broadband will be subject to certain limits on acquisitions of shares of New Charter common stock. In addition, any shares owned by A/N or Liberty Broadband in excess of its applicable voting cap (23.5% in the case of A/N; 25.01% in the case of Liberty Broadband, subject to increase up to a certain maximum amount in specified circumstances) must be voted in proportion to the public stockholders of New Charter, other than with respect to certain specified matters. At the closing of the BHN transactions, A/N and Liberty Broadband will enter into an agreement pursuant to which A/N will grant to Liberty Broadband a 5-year irrevocable proxy to vote, subject to certain exceptions, that number of New Charter shares held by A/N that will result in Liberty Broadband having voting power in New Charter equal to 25.01% of the outstanding voting power of New Charter (provided, that the voting power of the proxy shares granted by A/N will be capped at 7.0% of the outstanding voting power of New Charter), as well as a right of first refusal to purchase certain shares from A/N in the event it decides to dispose of such shares. Each of A/N and Liberty Broadband will be subject to certain standstill provisions and shall not be permitted to form a group, within the meaning of Regulation 13D, with each other or otherwise have arrangements or understandings concerning New Charter except as otherwise permitted by the BHN/Liberty stockholders agreement (including, with respect to Liberty Broadband, Liberty Interactive and any third-party investors acquiring shares of Liberty Broadband, to the extent required to provide partial financing for the mergers).

Each of A/N and Liberty Broadband will be entitled to preemptive rights to maintain their respective equity ownership percentages of New Charter in certain specified circumstances and to the extent that each maintains certain specified thresholds of voting or equity ownership in New Charter. Each of A/N and Liberty Broadband will be subject to certain restrictions on their ability to sell, transfer or dispose of their New Charter securities.

The number of directors that each of A/N and Liberty Broadband is entitled to nominate will decrease, and, generally, the other rights of each of A/N and Liberty Broadband will terminate, as such party falls below certain voting or equity ownership thresholds, subject to certain grace periods during which such party can return its equity or voting interest to the applicable threshold. Upon completion of the mergers, the provisions applicable to Charter under the stockholders agreement will become applicable to New Charter.

A copy of the BHN/Liberty stockholders agreement is attached as Annex C to this joint proxy statement/prospectus.

Liberty Investment Agreement (See Page [])

Pursuant to the Liberty investment agreement, at the closing of the purchase and sale contemplated by that agreement, Liberty Broadband will subscribe for, and New Charter will issue and sell, a number of shares of New

 

 

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Charter Class A common stock equal to the product of (a) the Parent Merger Exchange Ratio and (b) (i) $4.3 billion divided by (ii) $176.95, which is equal to approximately 22.0 million shares of New Charter Class A Common Stock.

A copy of the Liberty investment agreement is attached as Annex D to this joint proxy statement/prospectus.

Liberty Contribution Agreement (See Page [])

Pursuant to the Liberty contribution agreement, immediately prior to the closing of the first merger, each of Liberty Broadband and Liberty Interactive will contribute to Merger Subsidiary One each share of TWC common stock held by Liberty Broadband or Liberty Interactive, respectively, in exchange for one share of common stock of Merger Subsidiary One. Notwithstanding the foregoing, if Liberty Broadband and Liberty Interactive hold more than 110% of the shares they held as of the date of the Liberty contribution agreement (7,723,357 shares in the aggregate) such excess shares will be treated in the same manner as all other TWC shares pursuant to the merger agreement. In addition, Liberty Broadband and Liberty Interactive also covenant to maintain their share ownership over TWC stock at 99% of their ownership as of the date of the Liberty contribution agreement.

A copy of the Liberty contribution agreement is attached as Annex E to this joint proxy statement/prospectus.

The TWC Special Meeting of Stockholders (See Page [])

Meeting. The TWC special meeting will be held on [●], 2015, at [●], located at [●], at [●], local time. At the TWC special meeting, TWC stockholders will be asked to consider and vote on the following proposals:

 

    to approve the adoption of the merger agreement, pursuant to which, among other things, (i) Merger Subsidiary One will be first merged with and into TWC, with TWC continuing as the surviving corporation, and (ii) immediately thereafter TWC will be merged with and into Merger Subsidiary Two, with Merger Subsidiary Two continuing as the surviving entity and a wholly owned subsidiary of New Charter; and

 

    to approve, on an advisory (non-binding) basis, certain specified compensation that will or may be paid by TWC to its named executive officers in connection with the mergers.

Record Date. The TWC board of directors has fixed the close of business on [●], 2015, as the record date for determination of the stockholders entitled to vote at the TWC special meeting or any adjournment or postponement of the TWC special meeting. Only TWC stockholders of record as of the record date are entitled to receive notice of, and to vote at, the TWC special meeting or any adjournment or postponement of the TWC special meeting. As of the close of business on [●], 2015, there were [●] shares of TWC common stock outstanding. Each holder of TWC common stock is entitled to one vote for each share of TWC common stock owned as of the record date.

Quorum. The presence at the TWC special meeting, in person or by proxy, of the holders of a majority of the votes entitled to be cast for each proposal as of the record date (the close of business on [●], 2015) will constitute a quorum for such proposal. Abstentions will be deemed present at the TWC special meeting for the purpose of determining the presence of a quorum. Shares of TWC common stock held in “street name” with respect to which the beneficial owner fails to give voting instructions to the broker, bank, nominee or other holder of record will not be present at the TWC special meeting for the purpose of determining the presence of a quorum. There must be a quorum for business to be conducted at the TWC special meeting. Failure of a quorum to be represented at the TWC special meeting will necessitate an adjournment or postponement and will subject TWC to additional expense.

 

 

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Adjournment. In accordance with TWC’s bylaws, the TWC special meeting may be adjourned by the Chairman of the meeting. If the TWC special meeting is adjourned, stockholders who have already submitted their proxies will be able to revoke them at any time prior to their use.

Required Vote. To approve the adoption of the merger agreement, the affirmative vote of holders of a majority of the outstanding shares of TWC common stock entitled to vote is required. TWC cannot complete the mergers unless its stockholders adopt the merger agreement. Because adoption requires the affirmative vote of holders of a majority of the outstanding shares of TWC common stock entitled to vote, a TWC stockholder’s abstention from voting, the failure of a TWC stockholder who holds his or her shares in “street name” through a broker, bank, nominee or other holder of record to give voting instructions to that broker, bank, nominee or other holder of record or a TWC stockholder’s other failure to vote will have the same effect as a vote “AGAINST” the approval of the adoption of the merger agreement.

To approve, on an advisory (non-binding) basis, certain specified compensation that will or may be paid by TWC to its named executive officers in connection with the mergers, the affirmative vote of a majority of the votes cast at the TWC special meeting by holders of shares of TWC common stock is required. An abstention is not considered a vote cast. Accordingly, assuming a quorum is present, a TWC stockholder’s abstention from voting, the failure of a TWC stockholder who holds his or her shares in “street name” through a broker, bank, nominee or other holder of record to give voting instructions to that broker, bank, nominee or other holder of record or a TWC stockholder’s other failure to vote will have no effect on the outcome of any vote to approve the TWC advisory compensation proposal.

Stock Ownership of and Voting by TWC Directors and Executive Officers. As of the record date for the TWC special meeting (the close of business on [●], 2015), TWC’s directors and executive officers and their affiliates beneficially owned and had the right to vote [●] shares of TWC common stock at the TWC special meeting, which represents approximately [●]% of the shares of TWC common stock entitled to vote at the TWC special meeting.

It is expected that TWC’s directors and executive officers will vote their shares “FOR” the approval of adoption of the merger agreement and “FOR” the TWC advisory compensation proposal, although none of them has entered into any agreement requiring them to do so.

The Charter Special Meeting of Stockholders (See Page [])

Meeting. The Charter special meeting will be held on [●], 2015, at [●], located at [●], at [●], local time. At the Charter special meeting, Charter stockholders will be asked to consider and vote on the following proposals:

 

    to approve the adoption of the merger agreement pursuant to which, among other things, (i) TWC will be merged with and into Merger Subsidiary Two, with Merger Subsidiary Two continuing as the surviving entity and a wholly owned subsidiary of New Charter and (ii) Charter will be merged with and into Merger Subsidiary Three, with Merger Subsidiary Three continuing as the surviving entity and a wholly owned subsidiary of New Charter (we refer to this proposal as the “Charter merger proposal”);

 

    to approve the issuance of Class A common stock, par value $0.001 per share, of New Charter in connection with the mergers contemplated by the merger agreement (we refer to this proposal as the “TWC transactions stock issuance proposal”);

 

   

to approve the issuance of (i) a newly created Class B common stock of New Charter or Charter, as applicable, and (ii) common units and preferred units of Charter Holdings (including shares of Class A Common Stock of New Charter or Charter, as applicable, which may be issued upon conversion or exchange of such common units or preferred units), in each case in connection with the BHN

 

 

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transactions (we refer to this proposal as the “BHN transactions stock issuance proposal” and together with the TWC transactions stock issuance proposal, the “stock issuances proposals”);

 

    to approve the BHN/Liberty stockholders agreement (including the issuance of shares of New Charter or Charter Class A common stock to Liberty Broadband thereunder), the Liberty investment agreement (including the issuance of New Charter Class A common stock to Liberty Broadband thereunder), the Liberty contribution agreement and other transactions contemplated by the merger agreement and the foregoing agreements with Liberty Broadband and Liberty Interactive, as required by Charter’s existing certificate of incorporation (we refer to this proposal as the “Liberty transactions proposal”);

 

    to approve the adoption of the amended and restated certificate of incorporation (which will include the creation of the new class of Class B common stock of New Charter or Charter, as applicable) that will either be the amended and restated certificate of incorporation of New Charter if the mergers are consummated or the amended and restated certificate of incorporation of Charter if the mergers are not consummated but the BHN transactions are consummated (we refer to this proposal as the “general certificate of incorporation proposal”);

 

    to approve separately a feature of the amended and restated certificate of incorporation of New Charter or Charter, as applicable, that will provide that the special approval requirements for certain business combination transactions contained in Article Eighth of Charter’s existing certificate of incorporation will only be effective upon the termination of the BHN contribution agreement and will not apply to any transaction agreed or consummated prior to such time (we refer to this proposal as the “certificate of incorporation feature proposal 1”);

 

    to approve separately a feature of the amended and restated certificate of incorporation of New Charter or Charter, as applicable, that will set forth the size and composition requirements for the board of directors that are required by the BHN/Liberty stockholders agreement (we refer to this proposal as the “certificate of incorporation feature proposal 2”);

 

    to approve separately a feature of the amended and restated certificate of incorporation of New Charter or Charter, as applicable, that will specify standards for decisions by the board of directors that are required by the BHN/Liberty stockholders agreement (we refer to this proposal as the “certificate of incorporation feature proposal 3”);

 

    to approve separately a feature of the amended and restated certificate of incorporation of New Charter or Charter, as applicable, that will provide for certain voting restrictions on Liberty Broadband and A/N as required by the BHN/Liberty stockholders agreement (we refer to this proposal as the “certificate of incorporation feature proposal 4,” and together with the general certificate of incorporation proposal and the certificate of incorporation feature proposals 1, 2 and 3, the “certificate of incorporation proposals”); and

 

    to approve, on an advisory (non-binding) basis, certain specified compensation that will or may be paid by Charter to its named executive officers in connection with the transactions (we refer to this proposal as the “Charter advisory compensation proposal”).

Record Date. The Charter board of directors has fixed the close of business on [●], 2015, as the record date for determination of the stockholders entitled to vote at the Charter special meeting or any adjournment or postponement thereof. Only Charter Class A stockholders who held shares as of the record date are entitled to receive notice of, and to vote at, the Charter special meeting or any adjournment or postponement of the Charter special meeting. As of the close of business on [●], 2015, there were [●] shares of Charter Class A common stock outstanding. Each holder of Charter Class A common stock is entitled to one vote for each share of Charter common stock owned as of the record date.

 

 

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Quorum. The holders of a majority of the voting power of the Charter Class A common stock issued and outstanding and entitled to vote, present either in person or by proxy at the Charter special meeting, will constitute a quorum. Abstentions will be deemed present for the purpose of determining the presence of a quorum. Shares of Charter common stock held in “street name” with respect to which the beneficial owner fails to give voting instructions to the broker, bank, nominee or other holder of record will not be deemed present for the purpose of determining the presence of a quorum. There must be a quorum for business to be conducted at the Charter special meeting. If a quorum is not present or if there are not sufficient votes for the approval of the proposals to be presented at the Charter special meeting, Charter expects that the Charter special meeting will be adjourned to solicit additional proxies. At any subsequent reconvening of the Charter special meeting, all proxies will be voted in the same manner as the proxies would have been voted at the original convening of the Charter special meeting, except for any proxies that have been effectively revoked or withdrawn prior to the subsequent meeting.

Adjournment. In accordance with Charter’s bylaws, the Charter special meeting may be adjourned by the Chairman of the meeting. If the Charter special meeting is adjourned, stockholders who have already submitted their proxies will be able to revoke them at any time prior to their use.

Required Vote. The following are the vote requirements for the proposals of Charter:

 

    Charter Merger Proposal: The affirmative vote of holders of a majority of the outstanding shares of Charter Class A common stock entitled to vote at the Charter special meeting at which a quorum is present and, with respect to the second merger, the affirmative vote of holders of a majority of the outstanding shares of Charter Class A common stock (excluding shares beneficially owned by Liberty Broadband and its affiliates and associates) entitled to vote at the Charter special meeting at which a quorum is present are required to approve the adoption of the merger agreement.

 

    Stock Issuances Proposals: The affirmative vote of a majority of the votes cast at the Charter special meeting at which a quorum is present by holders of shares of Charter Class A common stock is required to approve each of the stock issuances proposals.

 

    Liberty Transactions Proposal: The affirmative vote of holders of a majority of the outstanding shares of Charter Class A common stock (excluding shares of Charter Class A common stock beneficially owned by Liberty Broadband and its affiliates and associates) entitled to vote at the Charter special meeting at which a quorum is present is required to approve the Liberty transactions in accordance with Charter’s certificate of incorporation and the affirmative vote of a majority of the votes cast at the Charter special meeting at which a quorum is present by holders of shares of Charter Class A common stock is required to approve the Liberty transactions (with respect to stock issuances to Liberty Broadband).

 

    Certificate of Incorporation Proposals: The affirmative vote of holders of a majority of the outstanding shares of Charter Class A common stock entitled to vote at the Charter special meeting at which a quorum is present and the affirmative vote of holders of a majority of the outstanding shares of Charter Class A common stock (excluding shares beneficially owned by Liberty Broadband and its affiliates and associates) entitled to vote at the Charter special meeting at which a quorum is present are required to approve each certificate of incorporation proposal at the Charter special meeting at which a quorum is present.

 

    Charter Advisory Compensation Proposal: The affirmative vote of a majority of the votes cast at the Charter special meeting at which a quorum is present by holders of shares of Charter Class A common stock is required to approve, on an advisory (non-binding) basis, the Charter advisory compensation proposal.

The approval of each of the Charter merger proposal, the TWC transactions stock issuance proposal, the Liberty transactions proposal and each of the certificate of incorporation proposals are conditions to the obligations of TWC, New Charter and Charter to complete the mergers. However, for purposes of satisfying the conditions to the closing of the mergers, the certificate of incorporation proposals are

 

 

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required to be approved by a majority of the outstanding shares of Charter Class A common stock excluding shares beneficially owned by Liberty Broadband and its affiliates and associates. The approval of each of the BHN transactions stock issuance proposal, the Liberty transactions proposal (as it relates to the BHN/Liberty stockholders agreement and the stock issuance to Liberty Broadband in connection with the BHN transactions) and each of the certificate of incorporation proposals are conditions to the obligations of New Charter, Charter and A/N to complete the BHN transactions. Accordingly, Charter cannot complete the mergers (and in certain circumstances the BHN transactions) unless its stockholders approve the Charter merger proposal, the TWC transactions stock issuance proposal, the Liberty transactions proposal and each of the certificate of incorporation proposals as described above. A Charter stockholder’s abstention from voting, the failure of a Charter stockholder who holds his or her shares in “street name” through a broker, bank, nominee or other holder of record to give voting instructions to that broker, bank, nominee or other holder of record or a Charter stockholder’s other failure to vote will have the same effect as a vote “AGAINST” the Charter merger proposal, the Liberty transactions proposal and each of the certificate of incorporation proposals. With respect to each of the stock issuances proposals, assuming a quorum is present, a Charter stockholder’s abstention from voting, the failure of a Charter stockholder who holds his or her shares in “street name” through a broker, bank, nominee or other holder of record to give voting instructions to that broker, bank, nominee or other holder of record or a Charter stockholder’s other failure to vote will have no effect on the applicable stock issuances proposal. The approval of all of the certificate of incorporation proposals is required to approve the adoption of the amended and restated certificate of incorporation. The amended and restated certificate of incorporation will not be filed and become effective if any of the certificate of incorporation proposals is not approved by Charter stockholders. The approval of each of the certificate of incorporation proposals shall constitute the requisite approval of the adoption of the amended and restated certificate of incorporation as required by Delaware law.

Stock Ownership of and Voting by Charter Directors and Executive Officers. As of the record date for the Charter special meeting (the close of business on [●], 2015), Charter’s directors and executive officers and their affiliates beneficially owned and had the right to vote [●] shares of Charter Class A common stock at the Charter special meeting, which represents approximately [●]% of the shares of Charter common stock entitled to vote at the Charter special meeting.

It is expected that Charter’s directors and executive officers will vote their shares “FOR” each of the proposals of Charter, although none of them has entered into any agreement requiring them to do so. However, Liberty Broadband, of which John C. Malone, a member of the board of directors of Charter, is the chairman of the board of directors, and Gregory B. Maffei, another member of the board of directors of Charter, is the chief executive officer, has entered into a voting agreement with TWC, as described below.

Voting Agreement (See Page [])

Concurrently with the execution of the merger agreement, TWC entered into a voting agreement with Liberty Broadband.

Liberty Broadband has agreed to vote all of its shares of Charter Class A common stock (i) in favor of the Charter merger proposal, the TWC transactions stock issuance proposal, each of the certificate of incorporation proposals and the Charter advisory compensation proposal, and (ii) against any corporate action the consummation of which would reasonably be expected to prevent or delay the consummation of the transactions contemplated by the merger agreement.

The voting agreement imposes certain restrictions on Liberty Broadband’s right to transfer its shares of Charter Class A common stock, as described under “Other Agreement—Voting Agreement,” beginning on page [●] of this joint proxy statement/prospectus. The voting agreement will terminate upon the earlier to occur of: (i) the completion of the mergers and (ii) the date of termination of the merger agreement in accordance with its

 

 

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terms, subject to the survival of certain obligations of Liberty Broadband for six months beyond such termination date if the merger agreement terminates because either (x) approval of Charter’s stockholders for the transactions contemplated by the merger agreement is not obtained or (y) Charter intentionally and materially breaches its non-solicitation covenants or certain covenants to call its stockholder meeting in the merger agreement.

As of May 23, 2015, Liberty Broadband held in the aggregate 28,838,718 shares of Charter Class A common stock (representing approximately 25.74% of the outstanding shares of Charter Class A common stock as of such time). As of the record date for the Charter special meeting, Liberty Broadband held in the aggregate [●] shares of Charter Class A common stock (representing [●]% of the outstanding shares of Charter Class A common stock).

A copy of the voting agreement is attached as Annex F to this joint proxy statement/prospectus.

What TWC Stockholders Will Receive in the Mergers (See Page [])

If the first merger and the second merger are completed, after giving effect to the first and second mergers and application of the Option A Base Exchange Ratio or the Option B Base Exchange Ratio described in this joint proxy statement/prospectus, each share of TWC common stock outstanding immediately prior to the completion of the first merger (other than certain shares as described below) will effectively be converted into the right to receive either (at the election of the holder thereof):

 

    $100 in cash and shares of New Charter Class A common stock equivalent to 0.5409 shares of Charter Class A common stock; or

 

    $115 in cash and shares of New Charter Class A common stock equivalent to 0.4562 shares of Charter Class A common stock.

However, the actual number of shares of New Charter Class A common stock that TWC stockholders (except as described below) will be entitled to receive will be based on the Option A Effective Exchange Ratio and the Option B Effective Exchange Ratio, which are calculated by multiplying the exchange ratios of 0.5409 (which is the Option A Base Exchange Ratio) or 0.4562 (which is the Option B Base Exchange Ratio) specified above by 0.9042 (which is 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 in the third merger. The application of the Parent Merger Exchange Ratio to the stock portion of the merger consideration to be received by TWC stockholders will not impact the aggregate value represented by the shares of New Charter Class A common stock to be received by stockholders of TWC upon completion of the mergers. The foregoing calculations and mechanics are described in greater detail under “The Merger Agreement—Merger Consideration.” Shares of TWC common stock held by TWC as treasury stock, held by direct or indirect wholly owned subsidiaries of TWC or Charter (other than Merger Subsidiary One) or held by Liberty Broadband or Liberty Interactive will not receive the foregoing merger consideration. Liberty Broadband and Liberty Interactive will only receive shares of New Charter Class A common stock as a result of the three mergers, subject to the terms of the Liberty contribution agreement as described in more detail under “Other Agreements—Liberty Contribution Agreement.”

Example: Based on the exchange ratios stated above that do not take into account the Parent Merger Exchange Ratio, if you own 100 shares of TWC common stock at the time the first two mergers are completed, you will be entitled to receive either (i) $10,000 in cash and shares of New Charter Class A common stock equivalent to 54 shares of Charter Class A common stock or (ii) $11,500 in cash and shares of New Charter Class A common stock equivalent to 45 shares of Charter Class A common stock, and in either case you will also be entitled to receive cash in lieu of fractional shares as described below. However, based on the actual exchange ratios contained in the merger agreement, if you own 100 shares of TWC common stock at the time the first two mergers are completed, you will be entitled to receive either (i) $10,000 in cash and 48 shares of New

 

 

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Charter Class A common stock or (ii) $11,500 in cash and 41 shares of New Charter Class A common stock, and in either case you will also be entitled to receive cash in lieu of fractional shares as described below.

Neither TWC nor New Charter will issue any fractional shares in the mergers. Instead, after giving effect to the first two mergers, the total number of shares of New Charter Class A common stock that each TWC stockholder will receive as a result of the first two mergers will be rounded down to the nearest whole number, and each TWC stockholder will receive cash, without interest, for any fractional share of New Charter Class A common stock that he or she would otherwise receive in the mergers. The amount of cash for fractional shares will be calculated by multiplying the fraction of a share of New Charter Class A common stock that the TWC stockholder would otherwise be entitled to receive as a result of the first two mergers by both the Charter Class A common stock closing price as of the trading day immediately prior the closing of the mergers and 0.9042 (which is the exchange ratio that will be applied in the third merger).

The exchange ratios that TWC stockholders will be able to elect to receive for the stock portion of the merger consideration are both fixed, which means that they will not change between now and the date of the mergers, regardless of whether the market price of shares of either Charter Class A common stock or TWC common stock changes. Therefore, the value of the merger consideration will depend on the market price of shares of New Charter Class A common stock at the time TWC stockholders receive shares of New Charter Class A common stock in the mergers. Based on the closing price of a share of Charter Class A common stock on NASDAQ on May 20, 2015, the trading day on which Charter’s offer to merge with TWC was based, the merger consideration represented approximately $195.71 in value for each share of TWC common stock. Based on the closing price of a share of Charter Class A common stock on NASDAQ on [●], 2015, the most recent practicable trading day prior to the date of this joint proxy statement/prospectus, the merger consideration represented approximately $[●] in value for each share of TWC common stock in the case of the Option A Election or $[●] in value for each share of TWC common stock in the case of the Option B Election. The market price of shares of Charter Class A common stock has fluctuated since the date of the announcement of the merger agreement and will continue to fluctuate from the date of this joint proxy statement/prospectus to the date of the TWC special meeting and the date the mergers are completed and New Charter Class A common stock will fluctuate thereafter. The market price of shares of New Charter Class A common stock when received by TWC stockholders upon completion of the mergers could be greater than, less than or the same as the market price of equivalent shares of Charter Class A common stock on the date of this joint proxy statement/prospectus or at the time of the TWC special meeting.

What Charter Stockholders Will Receive in the Mergers (See Page [])

If the mergers are completed, each share of Charter Class A common stock outstanding immediately prior to the completion of the third merger will be converted into the right to receive 0.9042 shares of New Charter Class A common stock. New Charter will not issue any fractional shares in the third merger. Instead, the total number of shares of New Charter Class A common stock that each Charter stockholder will receive in the third merger will be rounded down to the nearest whole number, and each Charter stockholder will receive cash, without interest, for any fractional share of New Charter Class A common stock that he or she would otherwise receive in the this merger. The amount of cash for fractional shares will be calculated by multiplying the fraction of a share of New Charter Class A common stock that the Charter stockholder would otherwise be entitled to receive in the third merger by both the Charter Class A common stock closing price as of the trading day immediately prior the closing of the mergers and 0.9042 (which is the Parent Merger Exchange Ratio).

Example: If you own 100 shares of Charter Class A common stock at the time the third merger is completed, you will be entitled to receive 90 shares of New Charter Class A common stock, and you will also be entitled to receive cash in lieu of fractional shares as described below.

 

 

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The merger of Charter and Merger Subsidiary Three and the exchange of shares of Charter for shares of New Charter is intended to facilitate the completion of the mergers, and the completion of the BHN transactions. The Parent Merger Exchange Ratio of 0.9042 will also be applied to the stock portion of the merger consideration to be received by the TWC stockholders and, therefore the exchange of shares of Charter for New Charter as described above will not impact the aggregate value represented by the shares of New Charter Class A common stock to be received by stockholders of Charter upon completion of the mergers.

Dissenters’ Rights of Appraisal (See Page [])

A TWC stockholder who owned shares of TWC common stock as of [●], 2015, the record date fixed by the TWC board of directors for the special meeting will be entitled to dissent from the first merger and seek an appraisal of the fair value of his, her or its shares exclusive of any element of value arising from the accomplishment or expectation of the mergers, but only if he, she or it complies with all requirements of Delaware law (including Section 262 of the DGCL, the text of which can be found in Annex P to this joint proxy statement/prospectus) summarized under the caption “Dissenters’ Rights of Appraisal.” Based on the determination of the Delaware Court of Chancery, the appraised fair value of TWC shares may be more than, less than or equal to the value of the merger consideration. The appraised fair value of TWC shares would be paid to the dissenting stockholder only if the first merger is completed and an appraisal proceeding follows. See “Dissenters’ Rights of Appraisal.”

Charter stockholders do not have appraisal rights in connection with the third merger or any other transaction described in this joint proxy statement/prospectus.

Treatment of TWC Equity Awards (See Page [])

TWC Stock Options. At the completion of the second merger, each outstanding option awarded by TWC, whether or not exercisable or vested (but excluding any options held by a former employee of TWC, as described in the immediately succeeding paragraph), to purchase shares of TWC common stock will be converted into an option to purchase the number of shares of New Charter Class A common stock equal to the product of (x) the number of shares of TWC common stock subject to such option immediately prior to the completion of the first merger multiplied by (y) the Stock Award Exchange Ratio (as defined below), with any fractional shares rounded down to the next lower whole share of New Charter Class A common stock. The exercise price per share of New Charter Class A common stock for such option will be equal to the quotient of (i) the exercise price per share of such option immediately prior to the completion of the first merger divided by (ii) the Stock Award Exchange Ratio, rounded up to the nearest whole cent. Such converted options will be subject to the same terms and conditions as were applicable to the corresponding TWC options immediately prior to completion of the first merger. The Stock Award Exchange Ratio is determined based on the value a stockholder of TWC who elected to receive $100 in cash and shares of New Charter Class A common stock equivalent to 0.5409 shares of Charter Class A common stock would receive upon completion of the mergers. Accordingly, in the merger agreement, “Stock Award Exchange Ratio” is defined generally as the sum of (i) the product of (A) the Option A Base Exchange Ratio multiplied by (B) the Parent Merger Exchange Ratio and (ii) the product of (A) the quotient of (I) $100 divided by (II) the volume weighted average per-share price of Charter Class A common stock during the 10 full trading days ending on (and including) the trading day preceding the closing date, multiplied by (B) the Parent Merger Exchange Ratio.

At the completion of the second merger, each outstanding option awarded by TWC and held by a former employee of TWC, whether or not exercisable or vested, to purchase shares of TWC common stock will be cancelled, and TWC will pay such former employee an amount in cash computed by first determining the number of shares of New Charter Class A common stock to which such former employee would be entitled as if his or her stock options were converted in accordance with the preceding paragraph, and then multiplying such number by the excess of (i) the quotient of (A) the closing price of a share of Charter Class A common stock on

 

 

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the trading day immediately preceding the first merger, divided by (B) the Parent Merger Exchange Ratio (such quotient, the “Charter Adjusted Closing Price”) over (ii) the exercise price per share of such option (determined in accordance with the preceding paragraph). All options held by a former employee of TWC that have a converted per share exercise price equal to or exceeding the Charter Adjusted Closing Price will be immediately cancelled without any right to consideration. All cash payments will be reduced by applicable withholding taxes.

TWC Restricted Stock Units. At the completion of the second merger, each outstanding TWC employee restricted stock unit award (but excluding any such units held by a current or former non-employee director or a former employee of TWC, as described in the immediately succeeding paragraph), will be converted into the right to acquire the number of shares of New Charter Class A common stock equal to the product of (x) the number of shares of TWC common stock underlying such award immediately prior to completion of the first merger multiplied by (y) the Stock Award Exchange Ratio, with any fractional shares rounded down to the next lower whole share of New Charter Class A common stock. Such converted restricted stock units will be subject to the same terms and conditions as applied to the corresponding award immediately prior to completion of the first merger.

At the completion of the second merger, each TWC restricted stock unit award (which includes deferred stock units held by non-employee directors) held by (x) a current or former non-employee director or (y) a former employee of TWC will be cancelled, and TWC will pay such holder an amount in cash computed by first determining the number of shares of New Charter Class A common stock to which such person would be entitled if his or her stock units were converted in accordance with the preceding paragraph, and then multiplying such number by the Charter Adjusted Closing Price. All cash payments will be reduced by applicable withholding taxes.

If any restricted stock unit held by a former employee is subject to 409A of the Code and such former employee is also a “specified individual” within the meaning of Section 409A of the Code, then no cash payment will be made in respect of such award and instead such award will be converted in accordance with the preceding paragraph.

TWC 2011 Stock Incentive Plan

Following completion of the mergers, New Charter may make use of shares remaining available for grant under the Time Warner Cable Inc. 2011 Stock Incentive Plan, which is referred to in this joint proxy statement/prospectus as the TWC 2011 Plan, in accordance with NASDAQ rules.

Treatment of Charter Equity Awards (See Page [])

Charter Stock Options. At the completion of the third merger, each outstanding option, whether or not exercisable or vested, to purchase shares of Charter Class A common stock will be converted into an option to purchase the number of shares of New Charter Class A common stock equal to the product of (x) the number of shares of Charter Class A common stock subject to such option immediately prior to the completion of the third merger multiplied by (y) the Parent Merger Exchange Ratio, with any fractional shares rounded down to the next lower whole share of New Charter Class A common stock. The exercise price per share of New Charter Class A common stock will be equal to the quotient of (i) the exercise price of such option immediately prior to the completion of the third merger divided by (ii) the Parent Merger Exchange Ratio, rounded up to the nearest whole cent. Such converted options will be subject to the same terms and conditions as were applicable to the corresponding options immediately prior to completion of the third merger.

Charter Restricted Stock Awards. At the completion of the third merger, each outstanding Charter restricted stock award will be converted into an award with respect to the number of shares of New Charter Class A

 

 

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common stock equal to the product of (x) the number of shares of Charter Class A common stock underlying such award immediately prior to completion of the third merger multiplied by (y) the Parent Merger Exchange Ratio, with any fractional shares rounded down to the next lower whole share of New Charter Class A common stock. Such converted restricted stock awards will be subject to the same terms and conditions as applied to the corresponding awards immediately prior to completion of the third merger.

Charter Restricted Stock Units. At the completion of the third merger, each outstanding Charter restricted stock unit, whether or not vested, will be converted into the right to acquire the number of shares of New Charter Class A common stock equal to the product of (x) the number of shares of Charter Class A common stock underlying such unit immediately prior to completion of the third merger multiplied by (y) the Parent Merger Exchange Ratio, with any fractional shares rounded down to the next lower whole share of New Charter Class A common stock. Such converted restricted stock units will be subject to the same terms and conditions as applied to the corresponding units immediately prior to completion of the third merger.

Recommendations of the TWC Board of Directors (See Page [])

After consideration and consultation with its advisors, the TWC board of directors unanimously determined that the merger agreement, the mergers and the other transactions contemplated by the merger agreement are fair to and in the best interests of TWC’s stockholders and unanimously approved and declared advisable the merger agreement, the mergers and the other transactions contemplated by the merger agreement. The TWC board of directors unanimously recommends that TWC stockholders vote “FOR” the approval of the adoption of the merger agreement. For the factors considered by the TWC board of directors in reaching this decision, see “The Transactions—TWC’s Reasons for the Mergers; Recommendation of the TWC Board of Directors” and “TWC Proposals—TWC Proposal I: Approval of the Adoption of the Merger Agreement” beginning on pages [●] and [●], respectively, of this joint proxy statement/prospectus. In addition, the TWC board of directors unanimously recommends that TWC stockholders vote “FOR” the TWC advisory compensation proposal. See “TWC Proposals—TWC Proposal II: Advisory Compensation Proposal” beginning on page [●] of this joint proxy statement/prospectus.

Recommendations of the Charter Board of Directors (See Page [])

After consideration and consultation with its advisors, the members of the Charter board of directors unanimously determined that the merger agreement, the mergers, the stock issuances, the Liberty transactions, the amendments to the certificate of incorporation, the BHN transactions and the other transactions contemplated by the merger agreement, the Liberty agreements and the BHN contribution agreement are fair to and in the best interests of Charter and its stockholders and unanimously approved and declared advisable each of the merger agreement and the mergers and the amendments to the certificate of incorporation, and unanimously approved the stock issuances, the Liberty transactions, the BHN transactions and the other transactions contemplated by the merger agreement, the Liberty agreements and the BHN contribution agreement. In addition, the members of the Charter board of directors (other than the directors affiliated with Liberty Broadband) unanimously determined that the Liberty transactions are fair to and in the best interests of Charter and its stockholders and unanimously approved the Liberty transactions. The Charter board of directors unanimously recommends that Charter stockholders vote “FOR” the approval of the adoption of the merger agreement, “FOR” the approval of each of the stock issuances proposals, “FOR” the approval of the Liberty transactions proposal, “FOR” the approval of each of the certificate of incorporation proposals and “FOR” the Charter advisory compensation proposal. For the factors considered by the Charter board of directors in reaching these decisions and a more detailed discussion of the recommendation of the Charter board of directors that the Charter stockholders approve the foregoing matters, see “The Transactions—Charter’s Reasons for the Mergers and Other Transactions; Recommendation of the Charter Board of Directors,” beginning on page [●] of this joint proxy statement/prospectus.

 

 

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Opinions of TWC’s Financial Advisors (See Page [])

For purposes of the respective opinions and related analyses of TWC’s financial advisors described in this joint proxy statement/prospectus, (i) “transaction” means the acquisition of TWC by Charter and (ii) “related transactions” means the TWC transactions, the BHN transactions and the other transactions contemplated in connection therewith (other than the first merger and the second merger).

Opinion of Allen & Company LLC

TWC has engaged Allen & Company LLC, referred to in this joint proxy statement/prospectus as Allen & Company, as a financial advisor in connection with the proposed transaction. In connection with this engagement, TWC requested that Allen & Company evaluate and render an opinion to the TWC board of directors regarding the fairness, from a financial point of view, to holders of TWC common stock (other than Charter, Liberty Broadband, Liberty Interactive and their respective affiliates) of the merger consideration to be paid to such holders pursuant to the merger agreement. On May 23, 2015, at a meeting of the TWC board of directors held to evaluate the transaction, Allen & Company rendered to the TWC board of directors an oral opinion, which was confirmed by delivery of a written opinion dated May 23, 2015, to the effect that, as of that date and based on and subject to the matters described in its opinion, the merger consideration to be paid to holders of TWC common stock (other than Charter, Liberty Broadband, Liberty Interactive and their respective affiliates) pursuant to the merger agreement was fair, from a financial point of view, to such holders.

The full text of Allen & Company’s written opinion, dated May 23, 2015, which describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken, is attached to this joint proxy statement/prospectus as Annex L. Allen & Company’s opinion was intended for the benefit and use of the TWC board of directors (in its capacity as such) in connection with its evaluation of the merger consideration from a financial point of view and did not address any other term, aspect or implication of the transaction. Allen & Company’s opinion did not constitute a recommendation as to the course of action that the TWC board of directors or TWC should pursue in connection with the transaction or the related transactions, or otherwise address the merits of the underlying decision by TWC to engage in the transaction or the related transactions, including in comparison to other strategies or transactions that might be available to TWC or in which TWC might engage. Allen & Company’s opinion does not constitute advice or a recommendation to any stockholder as to the form or relative fairness of the merger consideration to be elected by such stockholder or as to how such stockholder should vote or act on any matter relating to the transaction, the related transactions or otherwise.

Opinion of Citigroup Global Markets Inc.

TWC also has retained Citigroup Global Markets Inc., referred to in this joint proxy statement/prospectus as Citi, as a financial advisor in connection with the proposed transaction. In connection with this engagement, TWC requested that Citi evaluate the fairness, from a financial point of view, to holders of TWC common stock (other than Charter, Liberty Broadband, Liberty Interactive and their respective affiliates) of the merger consideration to be received by such holders pursuant to the merger agreement. On May 23, 2015, at a meeting of the TWC board of directors held to evaluate the transaction, Citi delivered to the TWC board of directors an oral opinion, confirmed by delivery of a written opinion dated May 23, 2015, to the effect that, as of that date and based on and subject to various assumptions, matters considered and limitations and qualifications described in its opinion, the merger consideration to be received by holders of TWC common stock (other than Charter, Liberty Broadband, Liberty Interactive and their respective affiliates) pursuant to the merger agreement was fair, from a financial point of view, to such holders.

The full text of Citi’s written opinion, dated May 23, 2015, which describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken, is attached as Annex M to this

 

 

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joint proxy statement/prospectus and is incorporated herein by reference. The description of Citi’s opinion set forth below is qualified in its entirety by reference to the full text of Citi’s opinion. Citi’s opinion was provided for the information of the TWC board of directors (in its capacity as such) in connection with its evaluation of the merger consideration from a financial point of view and did not address any other terms, aspects or implications of the transaction. Citi was not requested to consider, and its opinion did not address, the underlying business decision of TWC to effect the transaction or the related transactions, the relative merits of the transaction and the related transactions as compared to any alternative business strategies or opportunities that might exist for TWC or the effect of any other transaction in which TWC might engage. Citi’s opinion is not intended to be and does not constitute a recommendation as to the form or relative fairness of the merger consideration to be elected by such stockholder or as to how any stockholder should vote or act on any matters relating to the proposed transaction, the related transactions or otherwise.

Opinion of Morgan Stanley & Co. LLC

TWC also has retained Morgan Stanley & Co. LLC, referred to in this joint proxy statement/prospectus as Morgan Stanley, as a financial advisor in connection with the proposed transaction. As part of that engagement, TWC requested that Morgan Stanley evaluate the fairness, from a financial point of view, to holders of TWC common stock (other than Charter, Liberty Broadband, Liberty Interactive and their respective affiliates) of the merger consideration to be received by such holders pursuant to the merger agreement. On May 23, 2015, at a meeting of the TWC board of directors held to evaluate the transaction, Morgan Stanley rendered its oral opinion, confirmed by delivery of a written opinion dated May 23, 2015, to the TWC board of directors to the effect that, as of that date and based on and subject to the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Morgan Stanley as set forth in its opinion, the merger consideration to be received by holders of TWC common stock (other than Charter, Liberty Broadband, Liberty Interactive and their respective affiliates) pursuant to the merger agreement was fair, from a financial point of view, to such holders.

The full text of Morgan Stanley’s written opinion, dated May 23, 2015, which sets forth, among other things, the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Morgan Stanley in connection with its opinion, is attached as Annex N to, and is incorporated by reference into, this joint proxy statement/prospectus. This summary is qualified in its entirety by reference to the full text of such opinion. Morgan Stanley’s opinion was directed to the TWC board of directors and addressed only the fairness from a financial point of view of the merger consideration as of the date of the opinion and did not address any other term or aspect of the merger agreement or the transaction. Morgan Stanley’s opinion did not address TWC’s underlying business decision to proceed with or effect the transaction or the related transactions, or the relative merits of the transaction and the related transactions as compared to any other alternative business transaction, or other alternatives, or whether or not such alternatives could be achieved or were available. Morgan Stanley expressed no opinion or recommendation as to the form or relative fairness of the merger consideration to be elected by the stockholders of TWC or how the stockholders of TWC or Charter should vote at the stockholders’ meetings to be held in connection with the transaction or otherwise.

Opinion of Financial Advisor to the TWC Independent Directors (See Page [])

For purposes of the opinion and related analyses of the financial advisor to the TWC independent directors described in this joint proxy statement/prospectus, (i) “transaction” means the acquisition of TWC by Charter and (ii) “related transactions” means the TWC transactions, the BHN transactions and other transactions contemplated in connection therewith (other than the first merger and the second merger).

 

 

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Opinion of Centerview Partners LLC

Centerview Partners LLC, referred to in this joint proxy statement/prospectus as Centerview, was retained as financial advisor to the TWC independent members of the TWC board of directors, referred to in this joint proxy statement/prospectus as the TWC independent directors, in connection with the proposed transaction. In connection with this engagement, Centerview was requested to evaluate the fairness, from a financial point of view, to holders of TWC common stock (other than shares held by TWC as treasury stock, shares owned by Merger Subsidiary One, shares held by any wholly owned subsidiary of TWC or Charter (other than Merger Subsidiary One), dissenting shares, together with shares held by Charter, Liberty Broadband, Liberty Interactive and their respective affiliates, collectively referred to as “excluded shares”) of the merger consideration to be paid to such holders pursuant to the merger agreement. On May 23, 2015, at a meeting of the TWC board of directors held to evaluate the transaction, Centerview delivered to the TWC board of directors an oral opinion, confirmed by delivery of a written opinion dated May 23, 2015, to the effect that, as of that date and based on and subject to various assumptions, matters considered and limitations and qualifications described in its opinion, the merger consideration to be paid to holders of TWC common stock (other than excluded shares) pursuant to the merger agreement was fair, from a financial point of view, to such holders.

The full text of Centerview’s written opinion, dated May 23, 2015, which describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken, is attached as Annex O and is incorporated herein by reference. The description of Centerview’s opinion set forth below is qualified in its entirety by reference to the full text of Centerview’s opinion. Centerview’s opinion was provided for the information and assistance of the TWC board of directors (in their capacity as directors and not in any other capacity) in connection with and for purposes of its evaluation of the merger consideration from a financial point of view and did not address any other term or aspect of the merger agreement or the transaction. Centerview expressed no view as to, and its opinion did not address, TWC’s underlying business decision to proceed with or effect the transaction or the related transactions, or the relative merits of the transaction and the related transactions as compared to any alternative business strategies or transactions that might be available to TWC or in which TWC might engage. Centerview’s opinion does not constitute a recommendation to any stockholder of TWC or any other person as to the form or relative fairness of the merger consideration to be elected by such stockholder or how such stockholder or other person should vote with respect to the transaction or otherwise act with respect to the transaction, the related transactions or any other matter.

Opinion of Charter’s Financial Advisors (See Page [])

Opinion of Goldman, Sachs & Co. Rendered in Connection with the TWC Transactions

On May 23, 2015, at a meeting of the board of directors of Charter, Goldman Sachs rendered its oral opinion, subsequently confirmed in writing, to the effect that, as of May 23, 2015, based upon and subject to the factors and assumptions set forth in Goldman Sachs’ written opinion, and taking into account the TWC Acquisition (as defined below), the Parent Merger Exchange Ratio pursuant to the merger agreement was fair from a financial point of view to the holders (other than Liberty Broadband and affiliates of a significant shareholder of Liberty Broadband, which we refer to, collectively, as the Liberty-related entities, and TWC and each of their respective affiliates) of shares of Charter Class A common stock. For purposes of Goldman Sachs’ opinion, “TWC Acquisition” was defined as the acquisition of all of the outstanding shares of common stock of TWC for consideration consisting of cash and shares of New Charter Class A common stock pursuant to the mergers and transactions contemplated by the merger agreement and the Liberty contribution agreement, together with the investment by Liberty Broadband of $4.3 billion in cash in New Charter in exchange for shares of New Charter Class A common stock as contemplated by the Liberty investment agreement.

 

 

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The full text of the written opinion of Goldman Sachs, dated May 23, 2015, which sets forth the assumptions made, procedures followed, matters considered, qualifications and limitations on the review undertaken in connection with the opinion, is attached to this joint proxy statement/prospectus as Annex H. The summary of Goldman Sachs’ opinion provided in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of Goldman Sachs’ written opinion. Goldman Sachs’ advisory services and opinion were provided for the information and assistance of the board of directors of Charter in connection with its consideration of the transactions contemplated by the merger agreement, the Liberty contribution agreement and the Liberty investment agreement, which we refer to, collectively for purposes of this section, as the TWC transactions, and the opinion does not constitute a recommendation as to how any holder of Charter Class A common stock should vote with respect to any portion of the TWC transactions or any other matter.

Opinion of Goldman, Sachs & Co. Rendered in Connection with the BHN transactions

On May 23, 2015, at a meeting of the board of directors of Charter, Goldman Sachs rendered its oral opinion, subsequently confirmed in writing, to the effect that, as of May 23, 2015, based upon and subject to the factors and assumptions set forth in Goldman Sachs’ written opinion, and taking into account, among other things, the issuance to Liberty Broadband of shares of New Charter Class A common stock pursuant to the BHN/Liberty stockholders agreement, which is referred to as the Liberty $700 million stock issuance, and the amounts and timing of the payments estimated by Charter to be payable under the tax receivables agreement contemplated by the term sheet referenced below, which we refer to as the tax receivables payments, the aggregate consideration (consisting of approximately $2.0 billion in cash, preferred units of Charter Holdings with a face amount of $2.5 billion, 34,279,843 common units of Charter Holdings (or, if the TWC transactions are consummated before the BHN transactions are consummated, 30,992,406 common units of Charter Holdings), and one share of Class B common stock of New Charter), which we refer to as the BHN consideration, to be paid by Charter Holdings and New Charter pursuant to the BHN contribution agreement was fair from a financial point of view to Charter.

The full text of the written opinion of Goldman Sachs, dated May 23, 2015, which sets forth the assumptions made, procedures followed, matters considered, qualifications and limitations on the review undertaken in connection with the opinion, is attached to this joint proxy statement/prospectus as Annex I. The summary of the Goldman Sachs opinion provided in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of Goldman Sachs’ written opinion. Goldman Sachs’ advisory services and opinion were provided for the information and assistance of the board of directors of Charter in connection with its consideration of the BHN transactions, and the opinion does not constitute a recommendation as to how any holder of Charter Class A common stock should vote with respect to any portion of the BHN transactions or any other matter.

Opinion of LionTree Advisors LLC in Connection with the TWC Transactions

On May 23, 2015, at a meeting of the Charter board of directors, LionTree Advisors LLC, which we refer to as LionTree, rendered an oral opinion to the Charter board of directors (which was confirmed in writing by delivery of LionTree’s written opinion dated May 23, 2015), as to the fairness, from a financial point of view, as of such date, to Charter of the merger consideration to be paid for the TWC common stock (for purposes of such opinion and this summary, other than (i) any such shares held by Liberty Broadband or Liberty Interactive, (ii) any such shares held by dissenting stockholders, (iii) any treasury shares, and (iv) any such shares held by any direct or indirect wholly owned subsidiary of TWC) pursuant to the merger agreement, based upon and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by LionTree in preparing its opinion.

 

 

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LionTree’s opinion was directed to the Charter board of directors and only addressed the fairness, from a financial point of view, to Charter of the merger consideration to be paid for the TWC common stock pursuant to the merger agreement and did not address any other aspect or implication of the mergers. The summary of LionTree’s opinion is described in greater detail under “The Transactions—Opinions of Charter’s Financial Advisors—Opinion of LionTree Advisors LLC in Connection with the TWC Transactions” beginning on page [] of this joint proxy statement/prospectus. The full text of its written opinion, which is included as Annex J to this joint proxy statement/prospectus, sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by LionTree in preparing its opinion. The summary of LionTree’s opinion provided in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of LionTree’s written opinion. However, neither LionTree’s opinion nor the summary of its opinion and the related analyses set forth in this joint proxy statement/prospectus constitute a recommendation to any stockholder as to how such stockholder should vote or act on any matter relating to the mergers or any other matter.

Opinion of LionTree Advisors LLC in Connection with the BHN Transactions

On May 23, 2015, at a meeting of the Charter board of directors, LionTree rendered an oral opinion to the Charter board of directors (which was confirmed in writing by delivery of LionTree’s written opinion dated May 23, 2015), as to the fairness, from a financial point of view, as of such date, to Charter of the consideration to be paid to A/N for the assets to be acquired pursuant to the BHN contribution agreement, which we refer to as the BHN consideration, based upon and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by LionTree in preparing its opinion.

LionTree’s opinion was directed to the Charter board of directors and only addressed the fairness, from a financial point of view, to Charter of the BHN consideration to be paid for the assets to be acquired pursuant to the BHN contribution agreement and did not address any other aspect or implication of the BHN transactions. The summary of LionTree’s opinion is described in greater detail under “The Transactions—Opinions of Charter’s Financial Advisors—Opinion of LionTree Advisors LLC in Connection with the BHN Transactions” beginning on page [] of this this joint proxy statement/prospectus. The full text of its written opinion, which is included as Annex K to this joint proxy statement/prospectus, sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by LionTree in preparing its opinion. The summary of LionTree’s opinion provided in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of LionTree’s written opinion. However, neither LionTree’s opinion nor the summary of its opinion and the related analyses set forth in this joint proxy statement/prospectus constitute a recommendation to any stockholder as to how such stockholder should vote or act on any matter relating to the BHN transactions or any other matter.

For further information, see “The Transactions—Opinions of Charter’s Financial Advisors,” beginning on page [●] of this joint proxy statement/prospectus.

Ownership of Shares of New Charter Class A Common Stock After the Mergers, the BHN Transactions and the Liberty Transactions (See Page [])

Based on the number of shares of TWC common stock, TWC options and TWC restricted stock units, Charter Class A common stock and Charter options, Charter restricted stock awards and Charter restricted stock units outstanding as of [●], 2015, New Charter expects to issue (i) approximately [●] million shares of New Charter Class A common stock to TWC stockholders (assuming Option A Election) pursuant to the mergers (including approximately [●] million shares to Liberty Broadband and Liberty Interactive in their capacities as TWC stockholders) and reserve for issuance approximately [●] million additional shares of New Charter Class A

 

 

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common stock in connection with the conversion, exercise or settlement of outstanding TWC options and TWC restricted stock units and future equity compensation awards and (ii) approximately [●] million shares of Charter Class A common stock to Charter stockholders pursuant to the mergers and reserve for issuance approximately [●] million additional shares of Charter Class A common stock in connection with the conversion, exercise or settlement of outstanding Charter options, Charter restricted stock awards and Charter restricted stock units and future New Charter equity compensation awards. The actual number of shares of New Charter Class A common stock to be issued and reserved for issuance pursuant to the mergers will be determined at completion of the mergers based on the TWC stockholder election, the applicable exchange ratios and the number of shares of TWC common stock, TWC options and TWC restricted stock units, Charter Class A common stock and Charter options, Charter restricted stock awards and Charter restricted stock units outstanding at that time. In addition, in connection with the completion of the mergers, New Charter will issue to Liberty Broadband approximately 21.97 million shares of New Charter Class A common, for which Liberty Broadband will pay $4.3 billion, and in connection with the BHN transactions, New Charter will issue approximately 3.66 million shares (giving effect to the Parent Merger Exchange Ratio) to Liberty Broadband pursuant to the BHN/Liberty stockholders agreement and will issue to A/N one share of New Charter Class B common stock, which will initially have a number of votes reflecting the voting power of the Charter Holdings common units (other than those owned by New Charter or Charter) and the convertible preferred units on an as-converted, as-exchanged basis, which voting rights are generally intended to reflect A/N’s economic interests in New Charter and Charter Holdings. In the event the closing of the BHN transactions occurs, but the closing of the mergers does not occur, Charter will issue to Liberty Broadband approximately 4.05 million shares of Charter Class A common stock.

Based on the number of shares of TWC common stock outstanding as of June 10, 2015, and the number of shares of Charter Class A common stock outstanding as of June 10, 2015, it is expected that, immediately after completion of the mergers, the issuance of shares to Liberty Broadband and the completion of the BHN transactions, and depending on the outcome of the election feature described above, TWC stockholders, excluding Liberty Broadband, are expected to own between approximately 41% and 45% of New Charter, A/N is expected to own between approximately 14% and 13% of New Charter, Liberty Broadband is expected to own between approximately 19% and 18% of New Charter and existing Charter stockholders (other than Liberty Broadband) are expected to own between approximately 26% and 24% of New Charter.

If only the mergers are completed, it is expected that former Charter stockholders (excluding Liberty Broadband) will own between approximately 31% and 28% of New Charter Class A common stock and former TWC stockholders (excluding Liberty Broadband) will own between approximately 48% and 53% of New Charter Class A common stock. If only the BHN transactions are completed, it is expected that following the BHN transactions existing Charter stockholders (excluding Liberty Broadband) will own approximately 52% of Charter Class A common stock, Liberty Broadband will own approximately 20% of Charter Class A common stock and A/N will indirectly own approximately 28% of Charter Class A common stock (in each case giving effect to the possible conversion and exchange of the Charter Holdings common units and preferred units to be issued to A/N).

In connection with the TWC transactions, Liberty Broadband and Liberty Interactive entered into a proxy and right of first refusal agreement, pursuant to which, in connection with the closing of the transactions contemplated by the merger agreement, Liberty Interactive will grant Liberty Broadband an irrevocable proxy to vote all New Charter Class A common stock owned beneficially or of record by Liberty Interactive following such closing, with certain exceptions including, among other things, change of control transactions of New Charter, bankruptcy events of New Charter, and an authorization of any new class of securities of New Charter. In addition, at the closing of the BHN transactions, A/N and Liberty Broadband will enter into a proxy agreement pursuant to which A/N will grant to Liberty Broadband a 5-year irrevocable proxy (which we refer to as the A/N proxy) to vote, subject to certain exceptions, that number of shares of New Charter Class A common stock and New Charter Class B common stock, in each case held by A/N (such shares are referred to as the “proxy shares”), that will result in Liberty Broadband having voting power in New Charter equal to 25.01% of the outstanding voting power of New Charter, provided,

 

 

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that the voting power of the proxy shares will be capped at 7.0% of the outstanding voting power of New Charter. Therefore, giving effect to the Liberty Interactive proxy and the A/N proxy and the voting cap contained in the BHN/Liberty stockholders agreement, Liberty Broadband is expected to have 25.01% of the outstanding voting power in New Charter following the consummation of the TWC transactions and BHN transactions.

Interests of TWC’s Directors and Executive Officers in the Transactions (See Page [])

When considering the recommendation of the TWC board of directors that TWC stockholders vote in favor of the approval of the adoption of the merger agreement, TWC stockholders should be aware that directors and executive officers of TWC have certain interests in the mergers that may be different from or in addition to the interests of TWC stockholders generally. The TWC board of directors was aware of these interests and considered them, among other things, in evaluating and negotiating the merger agreement and the mergers and in recommending that TWC stockholders adopt the merger agreement.

These interests include the following:

 

    Upon the completion of the mergers, all TWC restricted stock unit and option awards covering the issuance of shares of TWC common stock held by active employees will convert into New Charter restricted stock unit and option awards covering the issuance of shares of New Charter Class A common stock in accordance with the methodology set forth in the merger agreement (as described in this joint proxy statement/prospectus) that is designed to preserve the value of such awards and uses the same exchange ratio that applies to TWC stockholders who made the Option A Election in the mergers. The converted awards will otherwise continue on the same terms and conditions that applied to the awards pre-conversion, including vesting conditions and forfeiture provisions.

 

    If a TWC executive officer’s employment is involuntarily terminated or he or she resigns for “good reason” following the completion of the mergers, all restricted stock units and unvested options held by the officer at that time will become 100% vested (a “double trigger”).

 

    As a measure to encourage employee retention during the pendency of the mergers, all TWC employees who were eligible to receive equity awards (approximately 1,900 employees), including the executive officers, received equity awards in June 2015 that advanced equity awards that would otherwise have been made in 2017. This grant is referred to in this joint proxy statement/prospectus as the 2017 retention grant. The value and vesting periods of the retention grants were designed to mirror what they would have been in respect of the regularly-scheduled 2017 annual grants. The intended value of each employee’s 2017 retention grant was intended to equal the value of the employee’s long-term incentive target value at the time of grant. The vesting period required for full or partial vesting is the same as it would have been if the regularly-scheduled 2017 grant had been made instead (without performance-based vesting conditions and subject to potential acceleration of vesting upon certain terminations of employment after the completion of the mergers and forfeiture upon certain terminations prior to that time). Pursuant to the merger agreement, before the completion of the mergers, TWC may not make equity grants other than in the ordinary course of business consistent with past practice and subject to the limitation that, in all cases, the aggregate value of (i) the 2017 retention grant (which totaled approximately $147.6 million at the date of grant) and (ii) other permitted equity awards (but excluding ordinary course equity grants to new hires, newly promoted executives, and annual equity awards to non-employee directors) made prior to the completion of the mergers cannot exceed $225 million at the time of grant. TWC does not intend to make additional annual equity grants in 2016 and 2017 with respect to 2016 and 2017, respectively, regardless of whether the mergers are completed or the merger agreement is terminated.

 

 

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    TWC’s executive officers are parties to employment agreements that provide for cash severance payments and benefits in the event of certain terminations of employment. For certain of these officers, the severance is enhanced if such termination occurs in connection with a change in control, such as the completion of the mergers. Pursuant to the terms of the merger agreement, following the completion of the mergers, Charter is required to honor the severance arrangements of TWC’s executive officers in accordance with their terms.

 

    As a measure to encourage employee focus on TWC’s goals and retention during the pendency of the mergers and thereafter, TWC has awarded a supplemental bonus opportunity to all employees, including its executive officers, who participate in TWC’s regular 2015 annual cash incentive plan (approximately 14,000 employees). The supplemental bonus opportunity is equal to 50% of each eligible employee’s actual bonus payout under TWC’s regular 2015 annual cash incentive plan. While the 2015 annual cash incentive plan bonuses will be paid subject to performance and when such bonuses would normally be paid, any supplemental bonus will generally be paid out on July 1, 2016. The supplemental bonus is generally not payable if the 2015 performance conditions are not met. Under the merger agreement, TWC is permitted to pay out these supplemental bonuses in an amount of up to $100 million, in the aggregate.

 

    Under the terms of the merger agreement, New Charter is required, for the period beginning on the completion of the mergers and ending on the first anniversary of the completion of the mergers, (i) to provide TWC employees (except those covered by a collective bargaining agreement) with base pay and annual cash bonus opportunities, as applicable, that are no less favorable in the aggregate than those provided to TWC employees immediately prior to the completion of the mergers and (ii) to provide TWC employees (except those covered by a collective bargaining agreement) with commission and cash incentive opportunities, as applicable, that are no less favorable than either those provided to each such TWC employee immediately prior to the completion of the mergers or those provided to similarly situated employees of New Charter or its subsidiaries following the completion of the mergers. The 2017 retention grant and 2015 supplemental bonus are not taken into account in determining whether such compensation is not less favorable than it was before the completion of the mergers.

 

    Upon the completion of the mergers, all equity awards held by TWC’s non-employee directors will be cancelled, and TWC will pay such directors a cash amount calculated as described under “The Merger Agreement—Treatment of TWC Equity Awards” beginning on page [●] of this joint proxy statement/prospectus.

 

    TWC’s directors and executive officers are entitled to continued indemnification and insurance coverage under the merger agreement.

For a more complete description of these interests, see “Interests of TWC’s Directors and Executive Officers in the Transactions,” “The Merger Agreement—Employee Matters” and “The Merger Agreement—Indemnification and Insurance,” beginning on pages [●], [●] and [●], respectively, of this joint proxy statement/prospectus.

Interests of Charter’s Directors and Executive Officers in the Transactions (See Page [])

When considering the recommendation of the Charter board of directors that Charter stockholders vote in favor of the approval of the adoption of the merger agreement, the stock issuances proposals, the Liberty transactions proposal and each of the certificate of incorporation proposals, Charter stockholders should be aware that directors and executive officers of Charter have certain interests in the proposed mergers and other transactions that may be different from or in addition to the interests of Charter stockholders generally. The Charter board of directors was aware of these interests and considered them, among other things, in evaluating

 

 

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and negotiating the various transaction agreements and the proposed mergers and other transactions, and in making its recommendation that Charter’s stockholders vote to approve the various proposals of Charter.

These interests include the following:

 

    Outstanding Charter stock options, restricted stock awards and restricted stock units (including those held by the directors and executive officers) will convert upon completion of the third merger into New Charter stock options, restricted stock awards and restricted stock units of substantially equivalent value, and as a result of the mergers, such awards would be eligible for accelerated vesting under certain circumstances;

 

    Employment agreements between Charter and its executive officers (other than Kevin Howard) and a severance plan that covers Charter’s senior vice presidents (including Mr. Howard), each of which were in effect prior to the Charter board of director’s evaluation and negotiation of the various transaction agreements, provide for certain benefits upon a qualifying termination of employment of the applicable executive officer (which terminations are not currently anticipated in connection with the mergers);

 

    In connection with the consummation of the proposed mergers and other transactions, Charter’s chief executive officer, Thomas Rutledge, is expected to be offered the role of chief executive officer and chairman of New Charter and a new five-year employment agreement with New Charter, the terms of which are expected to be negotiated prior to consummation of the proposed mergers and other transactions; and

 

    Charter’s directors and executive officers are entitled to continued indemnification and insurance coverage under the merger agreement.

For a more complete description of these interests, see “Interests of Charter’s Directors and Executive Officers in the Transactions” and “The Merger Agreement—Indemnification and Insurance,” beginning on pages [●] and [●], respectively, of this joint proxy statement/prospectus.

Listing of Shares of New Charter Class A Common Stock and Delisting and Deregistration of TWC Common Stock (See Page [])

New Charter will apply for listing on NASDAQ, where shares of Charter Class A common stock are currently traded, of the shares of New Charter Class A common stock to be issued in the mergers and to Liberty Broadband. If the mergers are completed, the shares of New Charter Class A common stock to be issued in the mergers will be listed on NASDAQ, and TWC shares will no longer be listed on the New York Stock Exchange and will be deregistered under the Exchange Act.

Completion of the Mergers is Subject to Certain Conditions (See Page [])

As more fully described in this joint proxy statement/prospectus and in the merger agreement, the obligation of each of Charter, New Charter, Merger Subsidiary One, Merger Subsidiary Two and Merger Subsidiary Three, on the one hand, and TWC, on the other hand, to complete the mergers is subject to the satisfaction or waiver of a number of conditions, including the following:

 

    approval of the adoption of the merger agreement by the affirmative vote of holders of a majority of the outstanding shares of TWC common stock entitled to vote;

 

    approval of the adoption of the merger agreement by the affirmative vote of a majority of the outstanding shares of Charter Class A common stock entitled to vote and, with respect to the second merger, the affirmative vote of holders of a majority of the outstanding shares of Charter Class A common stock (excluding shares beneficially owned by Liberty Broadband and its affiliates and associates) entitled to vote;

 

 

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    approval of the New Charter stock issuance in connection with the mergers contemplated by the merger agreement by the affirmative vote of a majority of votes cast at the Charter special meeting by the holders of Charter Class A common stock;

 

    approval of the BHN/Liberty stockholders agreement (including the issuance of shares of New Charter or Charter Class A common stock to Liberty Broadband thereunder), the investment agreement with Liberty Broadband (including the issuance of New Charter or Charter Class A common stock to Liberty Broadband thereunder), the contribution agreement with Liberty Broadband and Liberty Interactive and the other transactions contemplated by the merger agreement and the foregoing agreements with Liberty Broadband and Liberty Interactive by the affirmative vote of a majority of the outstanding shares of Charter Class A common stock (excluding the shares beneficially owned by Liberty Broadband and its affiliates and associates) entitled to vote and by the affirmative vote of a majority of votes cast at the Charter special meeting by the holders of Charter Class A common stock;

 

    approval of New Charter’s amended and restated certificate of incorporation (and each of the related certificate of incorporation proposals) by the affirmative vote of a majority of the outstanding shares of Charter Class A common stock (excluding shares beneficially owned by Liberty Broadband and its affiliates and associates) entitled to vote;

 

    expiration or termination of any applicable waiting period (or extension thereof) under the HSR Act relating to the transactions contemplated by the merger agreement (solely with respect to the obligations of each of Charter, New Charter, Merger Subsidiary One, Merger Subsidiary Two and Merger Subsidiary Three to complete the mergers, without the imposition of any burdensome condition (see “The Merger Agreement—Reasonable Best Efforts Covenant” for a definition of burdensome condition));

 

    (i) adoption of an order, and release of the full text thereof, by the FCC granting its consent to the transfer of control or assignment of the licenses issued by the FCC to TWC or any of its subsidiaries or affiliates, (ii) approval of certain local franchise authorities (“LFAs”), such that the sum of the aggregate number of video subscribers of TWC belonging to franchise areas for which either (x) no LFA consent is required or (y) if LFA consent is required, such consent shall have been obtained, shall be no less than 85% of the aggregate number of video subscribers of TWC and (iii) authorizations of state public utilities commissions whose consent is required in connection with the transactions contemplated by the merger agreement (solely with respect to the obligations of each of Charter, New Charter, Merger Subsidiary One, Merger Subsidiary Two and Merger Subsidiary Three to complete the mergers, in each case without the imposition of any burdensome condition) (these requirements are described in more detail under “The Transactions—Regulatory Approvals Required for the Mergers”);

 

    except for the conditions described in the two preceding bullets, (i) absence of (x) any applicable law of a governmental authority of competent jurisdiction enacted or promulgated after the date of the merger agreement in a jurisdiction in which any of TWC, Charter or their respective subsidiaries has substantial operations and (y) any order of a governmental authority of competent jurisdiction that, in each case, (1) imposes any burdensome condition or (2) prohibits completion of the mergers and the violation of which would result in criminal liability, and (ii) the absence of any injunction (whether temporary, preliminary or permanent) by any governmental authority of competent jurisdiction that imposes a burdensome condition or prohibits completion of the mergers;

 

    effectiveness of the registration statement for the shares of New Charter Class A common stock being issued in the mergers (of which this joint proxy statement/prospectus forms a part) and the absence of any stop order suspending that effectiveness or any proceedings for that purpose pending before the SEC;

 

    approval for the listing on NASDAQ of the shares of New Charter Class A common stock to be issued in the mergers, subject only to official notice of issuance;

 

 

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    accuracy of the representations and warranties made in the merger agreement by the other party, subject to certain materiality thresholds;

 

    performance in all material respects by the other party of the material obligations required to be performed by it at or prior to completion of the merger;

 

    the absence of a material adverse effect on the other party (see “The Merger Agreement—Definition of ‘Material Adverse Effect,’” beginning on page [●] of this joint proxy statement/prospectus for the definition of material adverse effect);

 

    receipt of a certificate executed by an executive officer of the other party as to the satisfaction of the conditions described in the preceding three bullets with respect to such other party; and

 

    delivery of opinions of Wachtell, Lipton, Rosen & Katz, in the case of Charter, and Paul, Weiss, Rifkind, Wharton & Garrison LLP, in the case of TWC, with respect to certain tax aspects of the mergers.

Charter and TWC cannot be certain when, or if, the conditions to the mergers will be satisfied or waived, or that the mergers will be completed.

The mergers are not conditioned upon completion of the BHN transactions (or the stock issuance to A/N). The mergers and the BHN transactions are subject to separate conditions, and the mergers may be completed whether or not the BHN transactions are ultimately consummated. The consummation of the BHN transactions is conditioned on the completion of the mergers. However, if the mergers are not completed, Charter and A/N may still be obligated to complete the BHN transactions in certain circumstances, as described under “The BHN Contribution Agreement” if the tail condition (which is described in greater detail under “The BHN Contribution Agreement—Conditions to the Completion of the Contribution) is satisfied. There can be no assurance that the BHN transactions will be completed if the mergers are not completed.

The Mergers May Not Be Completed Without All Required Regulatory Approvals (See Page [])

Completion of the mergers is conditioned upon the receipt of certain governmental clearances or approvals, including, but not limited to, the expiration or termination of the waiting period relating to the mergers under the HSR Act, approval of the FCC and certain other governmental consents and approvals from state regulators and franchise authorities.

Under the HSR Act, certain transactions, including the mergers, may not be completed unless certain waiting period requirements have expired or been terminated. The HSR Act provides that each party must file a pre-merger notification with the Federal Trade Commission, which is referred to in this joint proxy statement/prospectus as the FTC, and the Antitrust Division of the DOJ. A transaction notifiable under the HSR Act may not be completed until the expiration of a 30-calendar-day waiting period following the parties’ filings of their respective HSR Act notification forms or the termination of that waiting period. If the DOJ issues a Request for Additional Information and Documentary Material prior to the expiration of the initial waiting period, the parties must observe a second 30-calendar-day waiting period, which would begin to run only after both parties have substantially complied with the request for additional information, unless the waiting period is terminated earlier.

Both Charter and TWC are subject to regulation by the FCC under the Communications Act of 1934, as amended, which is referred to in this joint proxy statement/prospectus as the Communications Act. Each company holds a number of licenses and authorizations issued by the FCC for the operation of its business. The FCC must approve the transfer of control of these licenses and authorizations to New Charter as a result of the mergers. The mergers are also subject to the approval of LFAs with respect to the transfer of control of franchises as a result of the mergers. In addition, Charter and TWC are required to obtain approval of certain state public utility commissions with respect to the transfer of control of certificates of public convenience and necessity for telecommunications services and in connection with financing-related regulatory requirements of some states in connection with the mergers.

 

 

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Charter and TWC have agreed to use their respective reasonable best efforts to obtain all regulatory approvals required to complete the mergers. In furtherance of the foregoing, Charter and TWC agreed in the merger agreement to make and not withdraw (i) as promptly as practicable (and not later than 30 business days following the date of the merger agreement), an appropriate filing of a Notification and Report Form pursuant to the HSR Act and all necessary filings to obtain consents from the FCC that are required in connection with the mergers, and (ii) as promptly as practicable (and not later than July 22, 2015), all necessary filings to obtain consents from state regulators and franchise authorities, and all other registrations, declarations, notices and filings with governmental authorities that are required in connection with the mergers.

Charter’s obligation to use “reasonable best efforts” will include such efforts to take any actions and accept any conditions and other remedies to the extent such actions, conditions or other remedies would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the condition (financial or otherwise), business, assets or results of operations of Charter, TWC and their subsidiaries, taken as a whole (but without taking into account the BHN transactions). Each condition, remedy or action that Charter is not required to accept or take is referred to in this joint proxy statement/prospectus as a “burdensome condition.” Charter and TWC have also agreed not to, and to cause their respective subsidiaries and affiliates not to, (i) take any action that would reasonably be expected to have the effect of materially delaying, impairing or impeding the receipt of any regulatory approvals required in connection with the transactions contemplated by the merger agreement or the completion of the mergers, or (ii) acquire or agree to acquire (by merger, consolidation, acquisition of stock or assets or otherwise), directly or indirectly, any assets, securities (other than securities issued by such party as permitted by the terms of the merger agreement), properties, interests or business in any transaction or series of related transactions if such acquisition would (A) require approval of the FCC or (B) (without the consent of the other party, not to be unreasonably withheld, conditioned or delayed) have a value, or involve the payment of consideration, in excess of $350 million, subject to certain limited exceptions agreed to by the parties (including the ability of Charter and its subsidiaries to bid on and purchase wireless spectrum). In addition, TWC has agreed not to accept any of the conditions or take any actions in connection with TWC’s and Charter’s efforts to obtain regulatory approval without Charter’s prior written consent.

The regulatory filings described above relate to approvals for the mergers only. Charter and A/N have also agreed to certain regulatory approval covenants relating to the BHN transactions described below.

Completion of the BHN Transactions is Subject to Certain Conditions (See Page [])

As more fully described in this joint proxy statement/prospectus and in the BHN contribution agreement, the obligation of each party to the BHN contribution agreement to complete the BHN transactions is subject to the satisfaction or waiver of a number of conditions, including the following:

 

    the consummation of the mergers, except in certain circumstances;

 

    expiration or termination of the HSR Act waiting period and receipt of certain regulatory approvals applicable to the completion of the BHN transactions (solely with respect to the obligations of Charter, New Charter and Charter Holdings, without the imposition of a BHN contribution burdensome condition);

 

    obtaining all of the required consents by the FCC to the transfer to Charter of all FCC licenses, authorizations, permits and consents held by BHN or its subsidiaries and/or used in the BHN business (solely with respect to Charter, New Charter and Charter Holdings, without the imposition of a BHN contribution burdensome);

 

   

the aggregate number of video customers served by the BHN systems used in the BHN business (i) pursuant to the “grandfathering” provisions of the Communications Act and (ii) pursuant to each franchise for which (A) no consent is required from any government entity for the completion of the BHN contribution or (B) any such consent is required and has been received (or deemed received under

 

 

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Section 617 of the Communications Act) (solely with respect to the obligations of Charter, New Charter and Charter Holdings, without the imposition of a BHN contribution burdensome condition) shall not be less than 80% of the video customers then served by the BHN systems used in the BHN business; and if less than 100% of such number of video customers, all applicable waiting periods (including extensions) shall have expired with respect to the FCC Forms 394 filed in connection with requests for approvals by local franchising authorities that have not been obtained;

 

    obtaining authorizations from state communications authorities as required for Charter to provide voice and other regulated services in the BHN systems used in the BHN business following the closing (solely with respect to the obligations of Charter, New Charter and Charter Holdings, without the imposition of a BHN contribution burdensome condition), all of which must remain in full force and effect;

 

    the absence of any statute, rule, regulation, executive order, decree, judgment, injunction or other order (whether temporary, preliminary or permanent) in effect that makes unlawful, prohibits, delays, enjoins or otherwise prevents or restricts, the consummation of the BHN transactions, or any pending action that seeks any of the foregoing;

 

    approval of the BHN transactions stock issuance proposal, the Liberty transactions proposal (as it relates to the BHN/Liberty stockholders agreement and the stock issuance to Liberty Broadband in connection with the BHN transactions) and each of the certificate of incorporation proposals;

 

    the BHN/Liberty stockholders agreement being valid, binding and enforceable and in full force and effect;

 

    the absence of a material adverse effect on the other party (see “The BHN Contribution Agreement—Definition of ‘Material Adverse Effect,’” beginning on page [●] of this joint proxy statement/prospectus for the definition of material adverse effect); and

 

    certain other customary conditions with respect to the accuracy of representations and warranties, performance of covenants and agreements, receipt of certifications with respect to the satisfaction of certain conditions, and delivery of certain other specified certificates, instruments of assignment and transaction documents.

As more fully described in the BHN contribution agreement, the obligation of Charter, New Charter and Charter Holdings to complete the BHN transactions is also subject to the completion by A/N of a restructuring, pursuant to which BHN will transfer to A/N certain excluded assets and A/N shall assume from BHN certain excluded liabilities.

The BHN Transactions May Not Be Completed Without All Required Regulatory Approvals (See Page [])

Completion of the BHN transactions is conditioned upon the receipt of certain governmental clearances or approvals, including, but not limited to, the expiration or termination of the waiting period relating to the BHN transactions under the HSR Act, approval of the FCC and certain other governmental consents and approvals from state regulators and franchise authorities.

Under the HSR Act, certain transactions, including the BHN transactions, may not be completed unless certain waiting period requirements have expired or been terminated. The HSR Act provides that each party must file a pre-transaction notification with the FTC and the DOJ. A transaction notifiable under the HSR Act may not be completed until the expiration of a 30-calendar-day waiting period following the parties’ filings of their respective HSR Act notification forms or the termination of that waiting period. If the DOJ issues a Request for

 

 

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Additional Information and Documentary Material prior to the expiration of the initial waiting period, the parties must observe a second 30-calendar-day waiting period, which would begin to run only after both parties have substantially complied with the request for additional information, unless the waiting period is terminated earlier.

Both Charter and BHN are subject to regulation by the FCC under the Communications Act. Each company holds a number of licenses and authorizations issued by the FCC for the operation of its business. The FCC must approve the transfer of control of these licenses and authorizations to New Charter as a result of the BHN transactions. The BHN transactions are also subject to the approval of LFAs with respect to the transfer of control of certain franchises as a result of the BHN transactions. In addition, Charter and A/N are required to obtain approval of certain state public utility commissions with respect to the transfer of control of certificates of public convenience and necessity for telecommunications services as a result of the BHN transactions.

Charter and A/N have agreed to use their respective reasonable best efforts to obtain all regulatory approvals required to complete the BHN transactions. In furtherance of the foregoing, Charter and A/N agreed in the BHN contribution agreement to file, as promptly as practicable (and not later than July 7, 2015), all appropriate applications and requests to obtain consents from the FCC and other government entities in connection with the BHN transactions and to promptly file any additional information requested by any government entity. Charter and A/N have also agreed not to, in bad faith, take any action that would reasonably be expected to have the effect of delaying, impairing or impeding the receipt of any regulatory approvals required in connection with the BHN transactions.

Charter’s obligation to use “reasonable best efforts” will not require Charter, New Charter, Charter Holdings or any of their subsidiaries to divest or otherwise hold separate any businesses, assets or properties, accept conditions or any take any other actions that would apply to or affect any businesses, assets or properties of Charter, New Charter, Charter Holdings or any of their subsidiaries or litigate or participate in the litigation of any proceeding involving the FCC, FTC or DOJ to oppose or defend against any action by any such governmental entity to prevent or enjoin the consummation of the BHN transactions; except such efforts will require Charter, New Charter, Charter Holdings and their respective subsidiaries to engage in divestitures or accept conditions or remedies or take other actions imposed by any such governmental entity to the extent such divestitures, actions, conditions or other remedies are (i) consistent in scope and magnitude with the conditions and actions required or imposed by governmental entities in connection with prior acquisitions of United States domestic cable systems completed in the 12 years prior to May 23, 2015 with an aggregate purchase price of at least $500 million or (ii) related to franchises, state telecommunication authorizations (other than California) or regional sports networks regardless of whether any such condition or action is required or imposed by a governmental entity in connection with prior acquisitions of United States domestic cable systems completed in the 12 years prior to May 23, 2015 with an aggregate purchase price of at least $500 million. Each condition, remedy or action that Charter is not required to accept or take is referred to in this joint proxy statement/prospectus as a “BHN contribution burdensome condition,” which is described in greater detail under “The BHN Contribution Agreement—Reasonable Best Efforts Covenant.”

We Expect to Complete the Mergers, the BHN Transactions and the Liberty Transactions by the End of 2015 (See Page [])

The mergers will occur no later than five business days after the conditions to its completion have been satisfied or, to the extent permitted, waived, unless otherwise mutually agreed by the parties to the merger agreement. The BHN transactions will occur no later than five business days after the conditions to its completion have been satisfied or, to the extent permitted, waived, unless otherwise mutually agreed by the parties to the BHN contribution agreement. As of the date of this joint proxy statement/prospectus, we expect to complete the mergers, the BHN transactions and the Liberty transactions by the end of 2015 due to our current

 

 

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expectations regarding the timing of certain regulatory approvals. However, there can be no assurance as to when, or if, the mergers, the BHN transactions and/or the Liberty transactions will occur or that they will occur by the end of 2015.

No Solicitation by TWC (See Page [])

As more fully described in this joint proxy statement/prospectus and in the merger agreement, and subject to the exceptions described below, TWC has agreed that neither TWC nor any of its subsidiaries will, nor will TWC or any of its subsidiaries authorize or permit any of its or their officers, directors, employees or representatives to (i) solicit, initiate or take any action to knowingly facilitate or encourage the submission of a TWC acquisition proposal (as defined under “The Merger Agreement—No Solicitation by TWC,” beginning on page [●] of this joint proxy statement/prospectus), (ii) enter into or participate in any discussions or negotiations regarding any such proposal, (iii) furnish any non-public information relating to TWC or its subsidiaries to any third party that is seeking to make, or has made, a TWC acquisition proposal, (iv) except as described below, fail to make, withdraw or modify in a manner adverse to Charter the recommendation of the TWC board of directors in favor of the approval of the adoption of the merger agreement or recommend a TWC acquisition proposal (any action described in this clause (iv) is referred to in this joint proxy statement/prospectus as a TWC adverse recommendation change), (v) fail to enforce or grant any waiver or release under any standstill or similar agreement, (vi) approve any transaction under, or any person becoming an “interested stockholder” under, the Delaware anti-takeover statute, or (vii) enter into an agreement or other instrument relating to a TWC acquisition proposal. However, so long as TWC and its representatives have otherwise complied with the foregoing requirements, TWC and its representatives may, at any time prior to the adoption of the merger agreement by TWC stockholders, participate in discussions with any third party who has made an unsolicited TWC acquisition proposal after the date of the merger agreement solely to request the clarification of the terms and conditions of the proposal so as to determine whether such proposal is, or could reasonably be expected to lead to, a TWC superior proposal (as defined under “The Merger Agreement—No Solicitation by TWC,” beginning on page [●] of this joint proxy statement/prospectus).

Notwithstanding the foregoing, at any time prior to the adoption of the merger agreement by TWC stockholders, subject to the terms and conditions described in the merger agreement, TWC is permitted to:

 

    engage in negotiations or discussions with any third party that has made, after the date of the merger agreement, a TWC superior proposal or a TWC acquisition proposal that the TWC board of directors determines in good faith, after consultation with its outside legal advisors, could reasonably be expected to lead to a TWC superior proposal by the third party making such TWC acquisition proposal, (ii) furnish to such third party and its representatives non-public information relating to TWC or any of its subsidiaries pursuant to a customary confidentiality agreement with such third party with terms no less favorable to TWC than those contained in the confidentiality agreement between TWC and Charter (but such confidentiality agreement need not contain a “standstill” or similar provision that prohibits such third party from making any TWC acquisition proposal, acquiring TWC or taking any other action); provided that all such information (to the extent not previously provided or made available to Charter) is provided or made available to Charter prior to or as promptly as practicable (but no later than 24 hours) after the time it is provided or made available to such third party) and (iii) take any action required by applicable law or that any court of competent jurisdiction orders TWC to take; and

 

    the TWC board of directors may make a TWC adverse recommendation change (i) following receipt of a TWC superior proposal or (ii) involving or relating to a TWC intervening event (as defined under “The Merger Agreement—No Solicitation by TWC,” beginning on page [●] of this joint proxy statement/prospectus).

 

 

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TWC is only permitted to take the actions described above if the TWC board of directors determines in good faith, after considering advice from outside legal counsel, that the failure to take that action would be inconsistent with its fiduciary duties under applicable law. In addition, before taking any of the actions described above, TWC has to notify Charter that it intends to take that action and continue to advise Charter on a current basis of the status and terms of any discussions and negotiations with any third party in connection with a TWC acquisition proposal. Further, the TWC board of directors is not permitted to make a TWC adverse recommendation change in response to a TWC acquisition proposal unless (i) such TWC acquisition proposal constitutes a TWC superior proposal, (ii) TWC promptly notifies Charter, in writing at least five business days before taking that action, of its intention to do so, and attaches the most current version of the proposed agreement under which such TWC superior proposal is proposed to be consummated and the identity of the third party making the TWC superior proposal, and (iii) Charter does not make, within such five-business-day period, an offer that is at least as favorable to the stockholders of TWC as such TWC superior proposal.

In addition, the TWC board of directors is not permitted to make a TWC adverse recommendation change in response to a TWC intervening event unless (i) TWC has provided Charter with written information describing the TWC intervening event in reasonable detail promptly after becoming aware of it and keeps Charter fully informed, on a reasonably current basis, of material developments with respect to such TWC intervening event, (ii) TWC has provided Charter at least five business days prior notice of its intention to make a TWC adverse recommendation change with respect to such TWC intervening event, attaching a reasonably detailed explanation of the facts underlying the determination by the TWC board of directors that a TWC intervening event has occurred and its need to make a TWC adverse recommendation change in light of the TWC intervening event and (iii) Charter does not make, within such five-business-day period, an offer that the TWC board of directors determines would obviate the need for a TWC adverse recommendation change in light of the TWC intervening event.

During any five-business-day period prior to effecting a TWC adverse recommendation change in response to a TWC acquisition proposal or a TWC intervening event, TWC and its representatives must negotiate in good faith with Charter and its representatives regarding any revisions to the terms of the transactions contemplated by the merger agreement proposed by Charter.

If the TWC board of directors withdraws, modifies or qualifies its recommendation in favor of the approval of the adoption of the merger agreement, the merger agreement must nonetheless be submitted to TWC’s stockholders for adoption, unless the merger agreement has been terminated in accordance with its terms. See “The Merger Agreement—Obligation of the TWC Board of Directors to Recommend the Merger Agreement and Call and Hold a Stockholders’ Meeting,” beginning on page [●] of this joint proxy statement/prospectus.

No Solicitation by Charter (See Page [])

As more fully described in this joint proxy statement/prospectus and in the merger agreement, and subject to the exceptions described below, Charter has agreed that neither Charter nor any of its subsidiaries will, nor will Charter or any of its subsidiaries authorize or permit any of its or their officers, directors, employees or representatives to (i) solicit, initiate or take any action to knowingly facilitate or encourage the submission of a Charter acquisition proposal (as defined under “The Merger Agreement—No Solicitation by Charter,” beginning on page [●] of this joint proxy statement/prospectus), (ii) enter into or participate in any discussions or negotiations regarding any such proposal, (iii) furnish any non-public information relating to Charter or its subsidiaries to any third party that is seeking to make, or has made, a Charter acquisition proposal, (iv) except as described below, fail to make, withdraw or modify in a manner adverse to TWC the recommendation of the Charter board of directors in favor of the approval of the adoption of the merger agreement and related proposals or recommend a Charter acquisition proposal (any action described in this clause (iv) is referred to in this joint proxy statement/prospectus as a Charter adverse recommendation change), (v) fail to enforce or grant any waiver or release under any standstill or similar agreement, (vi) approve any transaction under, or any person becoming

 

 

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an “interested stockholder” under, the Delaware anti-takeover statute, or (vii) enter into an agreement or other instrument relating to a Charter acquisition proposal. However, so long as Charter and its representatives have otherwise complied with the foregoing requirements, Charter and its representatives may, at any time prior to the adoption of the merger agreement by Charter stockholders and approval of the related proposals by Charter stockholders, participate in discussions with any third party who has made an unsolicited Charter acquisition proposal after the date of the merger agreement solely to request the clarification of the terms and conditions of the proposal so as to determine whether such proposal is, or could reasonably be expected to lead to, a Charter superior proposal (as defined under “The Merger Agreement—No Solicitation by Charter,” beginning on page [●] of this joint proxy statement/prospectus).

Notwithstanding the foregoing, at any time prior to the adoption of the merger agreement by Charter stockholders and approval of the related proposals by Charter stockholders, subject to the terms and conditions described in the merger agreement, Charter is permitted to:

 

    engage in negotiations or discussions with any third party that has made, after the date of the merger agreement, a Charter superior proposal or a Charter acquisition proposal that the Charter board of directors determines in good faith, after consultation with its outside legal advisors, could reasonably be expected to lead to a Charter superior proposal by the third party making such Charter acquisition proposal, (ii) furnish to such third party and its representatives non-public information relating to Charter or any of its subsidiaries pursuant to a customary confidentiality agreement with such third party with terms no less favorable to Charter than those contained in the confidentiality agreement between TWC and Charter (but such confidentiality agreement need not contain a “standstill” or similar provision that prohibits such third party from making any Charter acquisition proposal, acquiring Charter or taking any other action); provided that all such information (to the extent not previously provided or made available to TWC) is provided or made available to TWC prior to or as promptly as practicable (but no later than 24 hours) after the time it is provided or made available to such third party) and (iii) take any action required by applicable law or that any court of competent jurisdiction orders Charter to take; and

 

    the Charter board of directors may make a Charter adverse recommendation change (i) following receipt of a Charter superior proposal or (ii) involving or relating to a Charter intervening event (as defined under “The Merger Agreement—No Solicitation by Charter,” beginning on page [●] of this joint proxy statement/prospectus).

Charter is only permitted to take the actions described above if the Charter board of directors determines in good faith, after considering advice from outside legal counsel, that the failure to take that action would be inconsistent with its fiduciary duties under applicable law. In addition, before taking any of the actions described above, Charter has to notify TWC that it intends to take that action and continue to advise TWC on a current basis of the status and terms of any discussions and negotiations with any third party in connection with a Charter acquisition proposal. Further, the Charter board of directors is not permitted to make a Charter adverse recommendation change in response to a Charter acquisition proposal unless (i) such Charter acquisition proposal constitutes a Charter superior proposal, (ii) Charter promptly notifies TWC, in writing at least five business days before taking that action, of its intention to do so, and attaches the most current version of the proposed agreement under which such Charter superior proposal is proposed to be consummated and the identity of the third party making the Charter superior proposal, and (iii) TWC does not make, within such five-business-day period, an offer to revise the terms of the merger agreement that is at least as favorable to the stockholders of Charter as such Charter superior proposal.

In addition, the Charter board of directors is not permitted to make a Charter adverse recommendation change in response to a Charter intervening event unless (i) Charter has provided TWC with written information describing the Charter intervening event in reasonable detail promptly after becoming aware of it and keeps TWC fully informed, on a reasonably current basis, of material developments with respect to such Charter

 

 

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intervening event, (ii) Charter has provided TWC at least five business days prior notice of its intention to make a Charter adverse recommendation change with respect to such Charter intervening event, attaching a reasonably detailed explanation of the facts underlying the determination by the Charter board of directors that a Charter intervening event has occurred and its need to make a Charter adverse recommendation change in light of the Charter intervening event and (iii) TWC does not make, within such five-business-day period, an offer to revise the terms of the merger agreement that the Charter board of directors determines would obviate the need for an adverse recommendation change in light of the Charter intervening event.

During any five-business-day period prior to effecting a Charter adverse recommendation change in response to a Charter acquisition proposal or a Charter intervening event, Charter and its representatives must negotiate in good faith with TWC and its representatives regarding any revisions to the terms of the transactions contemplated by the merger agreement proposed by TWC.

If the Charter board of directors withdraws, modifies or qualifies its recommendation in favor of the approval of the adoption of the merger agreement and approval of the related proposals by Charter stockholders, the merger agreement and the other related proposals must nonetheless be submitted to Charter’s stockholders for adoption and approval, unless the merger agreement has been terminated in accordance with its terms. See “The Merger Agreement—Obligation of the Charter Board of Directors to Recommend the Merger Agreement and Call and Hold a Stockholders’ Meeting” beginning on page [●] of this joint proxy statement/prospectus.

Termination of the Merger Agreement (See Page [])

As more fully described in this joint proxy statement/prospectus and in the merger agreement, and subject to the terms and conditions described in the merger agreement, the merger agreement may be terminated at any time before completion of the mergers in any of the following ways:

 

    by mutual written agreement of Charter and TWC;

 

    by either Charter or TWC, if:

 

    the mergers have not been completed on or before the initial end date (May 23, 2016), which may be extended if all conditions to completion have been satisfied on the initial end date other than certain conditions relating to regulatory approvals and either Charter or TWC elects to extend the initial end date to November 23, 2016, in which case the merger agreement may be terminated by either Charter or TWC if the mergers have not been completed on or before November 23, 2016; however, the right to terminate the merger agreement at the end date will not be available to any party whose breach of any provision of the merger agreement results in the failure of the mergers to be completed by such time;

 

    there (i) has been enacted or promulgated after the date of the merger agreement any applicable law (that is final and nonappealable) of any governmental authority of competent jurisdiction in which any of TWC, Charter or their respective subsidiaries has substantial operations or (ii) is in effect any order (that is final and nonappealable) of any governmental authority of competent jurisdiction that, in each case, (A) imposes a burdensome condition or (B) prohibits the consummation of the mergers and the violation of which would result in criminal liability; however, the right to terminate the merger agreement under this paragraph will not be available to any party whose breach of any provision of the merger agreement results in such applicable law, or order being in effect (the provision described in this paragraph being referred to as the “law or order termination right”);

 

   

there is in effect any injunction (that is final and nonappealable) by any governmental authority of competent jurisdiction that (i) imposes a burdensome condition or (ii) prohibits the consummation of the mergers; however, the right to terminate the merger agreement under this paragraph will not

 

 

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be available to any party whose breach of any provision of the merger agreement results in such injunction being in effect (the provision described in this paragraph being referred to as the “injunction termination right”);

 

    TWC stockholders fail to adopt the merger agreement upon a vote taken on such proposal at a TWC stockholders’ meeting called for that purpose;

 

    Charter stockholders fail to adopt the merger agreement and approve the related proposals upon a vote taken on such proposals at a Charter stockholders’ meeting called for that purpose; or

 

    there has been a breach by the other party of any representation or warranty or failure to perform any covenant or agreement that would result in the failure of the other party to satisfy the applicable condition to the closing related to accuracy of representations and warranties or performance of covenants, and such breach has not been cured within 30 days of notice thereof or is incapable of being cured, but only so long as the party seeking to so terminate is not then in breach of its representations, warranties, covenants or agreements contained in the merger agreement, which breach would cause the applicable condition to closing not to be satisfied; or

 

    by Charter, if:

 

    the TWC board of directors makes an adverse recommendation change or fails to reaffirm its recommendation to TWC stockholders in favor of adopting the merger agreement as promptly as practicable (but within 10 business days) after receipt of a written request to do so from Charter following the public announcement of a TWC acquisition proposal (provided that Charter may only make such request once with respect to any such TWC acquisition proposal or any material amendment thereto), in either case only prior to the adoption of the merger agreement by TWC’s stockholders; or

 

    prior to the adoption of the merger agreement by TWC stockholders, there has been an intentional and material breach by TWC of (i) any of its obligations described under “The Merger Agreement—No Solicitation by TWC,” which breach was authorized or permitted by TWC and results in a third party making a TWC acquisition proposal that is reasonably likely to materially interfere with or delay completion of the mergers, or (ii) its obligations to call and hold a meeting of its stockholders for purposes of adopting the merger agreement; or

 

    by TWC, if:

 

    the Charter board of directors makes an adverse recommendation change or fails to reaffirm its recommendation to Charter stockholders in favor of adopting the merger agreement and approving the related proposals as promptly as practicable (but within 10 business days) after receipt of a written request to do so from TWC following the public announcement of a Charter acquisition proposal (provided that TWC may only make such request once with respect to any such Charter acquisition proposal or any material amendment thereto), in either case only prior to the adoption of the merger agreement and approval of the related proposals by Charter’s stockholders; or

 

    prior to the adoption of the merger agreement and approval of the related proposals by Charter stockholders, there has been an intentional and material breach by Charter of (i) any of its obligations described under “The Merger Agreement—No Solicitation by Charter,” which breach was authorized or permitted by Charter and results in a third party making a Charter acquisition proposal that is reasonably likely to materially interfere with or delay completion of the mergers, or (ii) its obligations to call and hold a meeting of its stockholders for purposes of adopting the merger agreement and approving the related proposals.

 

 

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Termination Fees (See Page [])

The merger agreement requires Charter to pay TWC a termination fee of $1,000,000,000 if:

 

    TWC terminates the merger agreement as a result of the Charter board of directors making an adverse recommendation change or failing to reaffirm its recommendation to Charter stockholders in favor of adopting the merger agreement and approving the related proposals as promptly as practicable (but within 10 business days) after receipt of a written request to do so from TWC following the public announcement of a Charter acquisition proposal (as further described above);

 

    TWC terminates the merger agreement as a result of an intentional and material breach by Charter of (i) any of its obligations described under “The Merger Agreement—No Solicitation by Charter,” which breach was authorized or permitted by Charter and results in a third party making a Charter acquisition proposal that is reasonably likely to materially interfere with or delay completion of the mergers, or (ii) its obligations to call and hold a meeting of its stockholders for purposes of adopting the merger agreement and approving the related proposals (as further described above); or

 

    (i) TWC terminates the merger agreement as a result of the failure of the Charter stockholders to adopt the merger agreement and approve the related proposals upon a vote taken on such proposals at a Charter stockholders’ meeting called for that purpose or as a result of a breach by Charter of its representations or warranties or Charter’s failure to perform any covenant or agreement that would result in the failure of Charter to satisfy the applicable condition to the closing related to accuracy of representations and warranties or performance of covenants, (ii) prior to such termination (but after the date of the merger agreement) a Charter acquisition proposal has become publicly known and (iii) within 12 months following such termination, Charter enters into a definitive agreement to consummate such Charter acquisition proposal or such Charter acquisition proposal is consummated. For purposes of this paragraph, Charter acquisition proposal has the meaning set forth under “The Merger Agreement—No Solicitation by Charter,” except that references in that definition to “25%” will be deemed to be references to “50%.”

The merger agreement requires Charter to pay TWC a termination fee of $2,000,000,000 if (i) the merger agreement is terminated as a result of the mergers not having been completed on or before the initial end date (May 23, 2016) or the extended end date (November 23, 2016), as applicable, or pursuant to the law or order termination right or injunction termination right described above under “—Termination of the Merger Agreement,” (ii) at the time of such termination the conditions to the closing of the mergers relating to the HSR Act and FCC order are not satisfied but all other conditions to the completion of the mergers are satisfied (except for the conditions relating to the regulatory approvals and, if either the Charter or TWC stockholder meeting has not occurred, the conditions relating to the receipt of the stockholder approvals of Charter and TWC); provided, however, that the termination fee will not be payable under this paragraph if TWC terminates the merger agreement under the law or order termination right or injunction termination right as a result of the imposition of a burdensome condition, and further provided, however, that if the termination fee is payable in connection with a termination of the merger agreement pursuant to the law or order termination right or injunction termination right as described in “The Merger Agreement—Termination Rights,” the amount of the termination fee shall be $1,000,000,000 if at the time of the termination of the merger agreement the conditions to the completion of the mergers relating to the HSR Act and FCC order have been satisfied and all other conditions to the completion of the mergers are satisfied (except for the conditions relating to the regulatory approvals (other than the HSR Act or the FCC order) and, if either the Charter or TWC stockholder meeting has not occurred, the conditions relating to the receipt of the stockholder approvals of Charter and TWC).

 

 

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The merger agreement requires TWC to pay Charter a termination fee of $2,000,000,000 if:

 

    Charter terminates the merger agreement as a result of the TWC board of directors making an adverse recommendation change or failing to reaffirm its recommendation to TWC stockholders in favor of adopting the merger agreement as promptly as practicable (but within 10 business days) after receipt of a written request to do so from Charter following the public announcement of a TWC acquisition proposal (as further described above);

 

    Charter terminates the merger agreement as a result of an intentional and material breach by TWC of (i) any of its obligations described under “The Merger Agreement—No Solicitation by TWC,” which breach was authorized or permitted by TWC and results in a third party making a TWC acquisition proposal that is reasonably likely to materially interfere with or delay completion of the mergers, or (ii) its obligations to call and hold a meeting of its stockholders for purposes of adopting the merger agreement (as further described above); or

 

    (i) Charter terminates the merger agreement as a result of the failure of the TWC stockholders to adopt the merger agreement upon a vote taken on such proposal at a TWC stockholders’ meeting called for that purpose or as a result of a breach by TWC of its representations or warranties or TWC’s failure to perform any covenant or agreement that would result in the failure of TWC to satisfy the applicable condition to the closing related to accuracy of representations and warranties or performance of covenants, (ii) prior to such termination (but after the date of the merger agreement) a TWC acquisition proposal has become publicly known and (iii) within 12 months following such termination, TWC enters into a definitive agreement to consummate such TWC acquisition proposal or such TWC acquisition proposal is consummated. For purposes of this paragraph, TWC acquisition proposal has the meaning set forth under “The Merger Agreement—No Solicitation by TWC,” except that references in that definition to “25%” will be deemed to be references to “50%.”

Any termination fee payable by Charter or TWC will only be payable once and not in duplication even though a termination fee may be payable under one or more provisions of the merger agreement. The payment of a termination fee by TWC or Charter pursuant to the merger agreement will be the sole and exclusive remedy of the party receiving the payment for any liabilities, losses or damages arising out of, resulting from or incurred in connection with the merger agreement.

Specific Performance; Remedies (See Page [])

The parties to the merger agreement are entitled to an injunction or injunctions to prevent breaches of the merger agreement and to enforce specifically the terms and provisions of the merger agreement. This entitlement is in addition to any other remedy to which the parties are entitled at law or in equity.

Material U.S. Federal Income Tax Consequences of the Mergers (See Page [])

TWC and Charter intend for the payment of cash to a holder of shares of TWC common stock in the first merger to be treated as a distribution in partial redemption of such shares subject to the provisions of Section 302(a) of the Code, though this treatment is not free from doubt. In such case, a U.S. holder of shares of TWC common stock will generally recognize gain or loss equal to the difference between the amount of cash received in the first merger (including any cash received in lieu of fractional shares of TWC common stock) and the adjusted tax basis of the shares treated as exchanged for cash. However, U.S. holders who actually or constructively own New Charter Class A common stock other than New Charter Class A common stock received pursuant to the second merger may be treated as having received a dividend instead having sold or exchanged a portion of their shares of TWC common stock. The cash that a non-U.S. holder of shares of TWC common stock receives generally will be subject to withholding of U.S. federal income tax at a rate of 30%, subject to reduction, exemption, or the availability of a refund if specific requirements are met. However, alternative characterizations are possible.

 

 

 

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Charter and TWC intend for each of the second merger and the third merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Accordingly, U.S. holders of shares of the surviving corporation of the first merger or shares of Charter Class A common stock will generally not be subject to U.S. federal income tax as a result of the exchange of such shares for shares of New Charter Class A common stock (except in connection with cash received in lieu of a fractional share of New Charter Class A common stock in the third merger) in the second merger and the third merger, respectively. It is a condition to TWC’s obligation to complete the mergers that TWC receive an opinion from Paul, Weiss, Rifkind, Wharton & Garrison LLP, counsel to TWC, to the effect that the second merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. It is a condition to Charter’s obligation to complete the mergers that Charter receive an opinion from Wachtell, Lipton, Rosen & Katz, counsel to Charter, to the effect that each of the second merger and the third merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code.

Accounting Treatment (See Page [])

The mergers and BHN transactions will be accounted for using the acquisition method of accounting with Charter considered the accounting acquirer of TWC and Bright House. The acquisition method of accounting is based on Financial Accounting Standards Board, Accounting Standards Codification, which is referred to in this joint proxy statement/prospectus as ASC 805, “Business Combinations,” and uses the fair value concepts defined in ASC 820, “Fair Value Measurements and Disclosures,” which Charter has adopted as required. Charter will record assets acquired, including identifiable intangible assets, and liabilities assumed at their respective fair values at the date of completion of the transactions. Any excess of the purchase price (as described in the notes to the “Unaudited Pro Forma Financial Statements,” beginning on page [●] of this joint proxy statement/prospectus) over the net fair value of such assets and liabilities will be recorded as goodwill.

The financial condition and results of operations of New Charter after completion of the mergers and BHN transactions will reflect TWC and Bright House after completion of the transactions but will not be restated retroactively to reflect the historical financial condition or results of operations of TWC or Bright House. The earnings of New Charter following completion of the mergers and BHN transactions will reflect acquisition accounting adjustments, including the effect of changes in the carrying value for assets and liabilities on depreciation and amortization expense and additional interest expense from debt used for financing. Indefinite-lived intangible assets, including franchises and goodwill, will not be amortized but will be tested for impairment at least annually, and all tangible and intangible assets including goodwill will be tested for impairment when certain indicators are present. If, in the future, New Charter determines that tangible or intangible assets (including goodwill) are impaired, New Charter would record an impairment charge at that time.

Debt Financing for the Mergers and BHN Transactions (See Page [])

Charter expects to finance part of the consideration for the TWC transactions and BHN transactions with additional indebtedness of approximately $24 billion. This additional indebtedness is expected to be in the form of new senior secured bank loans, senior secured notes and unsecured indebtedness, subject to market conditions. This amount assumes that all TWC stockholders (other than Liberty Broadband and Liberty Interactive) elect, in accordance with the merger agreement, to receive $100 cash and the equivalent of 0.5409 shares of Charter Class A common stock for each share of TWC common stock. Charter has committed financing for approximately $4.3 billion of additional indebtedness, which would be substantially incurred through the issuance of unsecured notes by Charter Communications Operating Holdings, LLC, a subsidiary of Charter (“CCOH”), if all TWC stockholders (other than Liberty Broadband and Liberty Interactive) elect, in accordance with the merger agreement, to receive $115 cash and the equivalent of 0.4562 shares of Charter Class A common stock for each share of TWC common stock.

 

 

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Rights of Stockholders as a Result of the Mergers and/or BHN Transactions (See Page [])

TWC and Charter stockholders will have different rights once they become New Charter stockholders due to differences between the organizational documents of Charter, TWC and New Charter. These differences are described in more detail under “Comparison of Stockholder Rights,” beginning on page [●] of this joint proxy statement/prospectus.

 

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF CHARTER

The following table presents selected historical consolidated financial data of Charter and its subsidiaries. The selected financial data of Charter for each of the years ended December 31, 2014, 2013 and 2012, and as of December 31, 2014 and 2013, are derived from Charter’s audited consolidated financial statements set forth in Charter’s Annual Report on Form 10-K for the year ended December 31, 2014, which is incorporated by reference into this joint proxy statement/prospectus. The selected financial data of Charter for each of the years ended December 31, 2011 and 2010, and as of December 31, 2012, 2011 and 2010, have been derived from Charter’s audited consolidated financial statements for such years, which have not been incorporated by reference into this joint proxy statement/prospectus. The audited financial statements have been audited by KPMG LLP, an independent registered public accounting firm.

The selected financial data of Charter as of March 31, 2015, and for the three months ended March 31, 2015 and March 31, 2014 are derived from Charter’s unaudited consolidated financial statements and related notes contained in its Quarterly Report on Form 10-Q for the three months ended March 31, 2015, which is incorporated by reference into this joint proxy statement/prospectus. The selected financial data of Charter as of March 31, 2014 are derived from Charter’s unaudited consolidated financial statements for such period, which have not been incorporated by reference into this joint proxy statement/prospectus. The unaudited financial data presented have been prepared on a basis consistent with Charter’s audited consolidated financial statements. In the opinion of Charter’s management, such unaudited financial data reflect all adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation of the results for those periods. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year or any future period. The following information should be read in conjunction with the historical consolidated financial statements and related notes (in millions, except per share and share data).

 

    For and as of the
Three Months Ended
March 31,
    For and as of the Years Ended December 31,  
    2015     2014     2014     2013     2012     2011     2010  

Statement of Operations Data:

             

Revenues

  $ 2,362      $ 2,202      $ 9,108      $ 8,155      $ 7,504      $ 7,204      $ 7,059   

Income from operations

  $ 249      $ 240      $ 971      $ 909      $ 915      $ 1,036      $ 1,018   

Interest expense, net

  $ (289   $ (211   $ (911   $ (846   $ (907   $ (963   $ (877

Income (loss) before income taxes

  $ (46   $ 27      $ 53      $ (49   $ (47   $ (70   $ 58   

Net loss

  $ (81   $ (37   $ (183   $ (169   $ (304   $ (369   $ (237

Loss per common share, basic and diluted

  $ (0.73   $ (0.35   $ (1.70   $ (1.65   $ (3.05   $ (3.39   $ (2.09

Weighted-average shares outstanding, basic and diluted

    111,655,617        106,439,198        108,374,160        101,934,630        99,657,989        108,948,554        113,138,461   

Balance Sheet Data (end of period):

             

Investment in cable properties

  $ 16,491      $ 16,582      $ 16,652      $ 16,556      $ 14,870      $ 14,843      $ 15,027   

Total assets

  $ 24,410      $ 17,297      $ 24,550      $ 17,295      $ 15,596      $ 15,601      $ 15,737   

Total debt (including current portion)

  $ 20,964      $ 14,090      $ 21,023      $ 14,181      $ 12,808      $ 12,856      $ 12,306   

Shareholders’ equity

  $ 77      $ 127      $ 146      $ 151      $ 149      $ 409      $ 1,478   

Other Financial Data (Unaudited):

             

Ratio of earnings to fixed charges(a)

    N/A        1.13        1.06        N/A        N/A        N/A        1.07   

Deficiency of earnings to cover fixed charges(a)

  $ 46        N/A        N/A      $ 49      $ 47      $ 70        N/A   

 

N/A - Not applicable.
(a) Earnings include income (loss) before income taxes plus fixed charges. Fixed charges consist of interest expense and an estimated interest component of rent expense.

Comparability of the above information from year to year is affected by acquisitions and dispositions completed by us including the acquisition of Bresnan Broadband Holdings, LLC and its subsidiaries (“Bresnan”) in July 2013, and restricted cash and cash equivalents held in escrow as of March 31, 2015 pending consummation of our previously announced transactions with Comcast which were terminated in April 2015. Proceeds held in escrow were repaid in April 2015 upon the termination of the Comcast transactions. See Note 3 to Charter’s consolidated financial statements included in Charter’s Annual Report on Form 10-K for the year ended December 31, 2014, incorporated by reference in this joint proxy statement/prospectus, for additional information on the acquisition of Bresnan. See Notes 2 and 17 to Charter’s condensed consolidated financial statements included in Charter’s Quarterly Report on Form 10-Q for the three months ended March 31, 2015, incorporated by reference in this joint proxy statement/prospectus, for additional information on the Comcast transactions.

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF TWC

The following table presents selected historical consolidated financial data of TWC. The selected financial data of TWC for each of the years ended December 31, 2014, 2013 and 2012, and as of December 31, 2014 and 2013, are derived from TWC’s audited consolidated financial statements set forth in TWC’s Annual Report on Form 10-K for the year ended December 31, 2014, which is incorporated by reference into this joint proxy statement/prospectus. The selected financial data of TWC for each of the years ended December 31, 2011 and 2010, and as of December 31, 2012, 2011 and 2010, have been derived from TWC’s audited consolidated financial statements for such years, which have not been incorporated by reference into this joint proxy statement/prospectus. The audited consolidated financial statements have been audited by Ernst & Young LLP, an independent registered public accounting firm.

The selected financial data of TWC as of March 31, 2015, and for the three months ended March 31, 2015 and March 31, 2014 are derived from TWC’s unaudited consolidated financial statements and related notes contained in its Quarterly Report on Form 10-Q for the three months ended March 31, 2015, which is incorporated by reference into this joint proxy statement/prospectus. The selected financial data of TWC as of March 31, 2014 are derived from TWC’s unaudited consolidated financial statements for such period, which have not been incorporated by reference into this joint proxy statement/prospectus. The unaudited financial data presented have been prepared on a basis consistent with TWC’s audited consolidated financial statements. In the opinion of TWC’s management, such unaudited financial data reflect all adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation of the results for those periods. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year or any future period. The following information should be read in conjunction with the historical consolidated financial statements and related notes (in millions, except per share data).

 

     For and as of the
Three Months
Ended March 31,
    For and as of the Years Ended December 31,  
     2015     2014     2014     2013     2012     2011     2010  

Statement of Operations Data:

              

Revenues

   $ 5,777      $ 5,582      $ 22,812      $ 22,120      $ 21,386      $ 19,675      $ 18,868   

Income from operations

   $ 1,084      $ 1,092      $ 4,632      $ 4,580      $ 4,445      $ 4,069      $ 3,689   

Interest expense, net

   $ (348   $ (364   $ (1,419   $ (1,552   $ (1,606   $ (1,518   $ (1,394

Income before income taxes

   $ 746      $ 743      $ 3,248      $ 3,039      $ 3,336      $ 2,462      $ 2,196   

Net income attributable to TWC shareholders

   $ 458      $ 479      $ 2,031      $ 1,954      $ 2,155      $ 1,665      $ 1,308   

Net income per common share attributable to TWC common shareholders:

              

Basic

   $ 1.60      $ 1.71      $ 7.21      $ 6.76      $ 6.97      $ 5.02      $ 3.67   

Diluted

   $ 1.59      $ 1.70      $ 7.17      $ 6.70      $ 6.90      $ 4.97      $ 3.64   

Weighted-average common shares outstanding:

              

Basic

     281.5        277.8        279.3        287.6        307.8        329.7        354.2   

Diluted

     284.9        281.8        283.0        291.7        312.4        335.3        359.5   

Cash dividends declared per share of common stock

   $ 1.50      $ 0.75      $ 3.00      $ 2.60      $ 2.24      $ 1.92      $ 1.60   

Balance Sheet Data (end of period):

              

Investment in cable properties(a)

   $ 45,670      $ 44,637      $ 45,477      $ 44,628      $ 44,094      $ 40,467      $ 40,056   

Total assets

   $ 48,330      $ 49,153      $ 48,501      $ 48,273      $ 49,809      $ 48,276      $ 45,822   

Total debt (including current portion)

   $ 23,286      $ 25,854      $ 23,718      $ 25,052      $ 26,689      $ 26,442      $ 23,121   

Mandatorily redeemable preferred equity

   $ —        $ —        $ —        $ —        $ 300      $ 300      $ 300   

Total equity

   $ 8,144      $ 7,098      $ 8,017      $ 6,947      $ 7,283      $ 7,537      $ 9,217   

Other Financial Data (Unaudited):

              

Ratio of earnings to fixed charges(b)

     3.0x        2.9x        3.1x        2.8x        3.0x        2.6x        2.6x   

Ratio of earnings to combined fixed charges and preferred dividend requirements(b)

     3.0x        2.9x        3.1x        2.8x        3.0x        2.6x        2.6x   

 

(a) Investment in cable properties represents the total of (i) property, plant and equipment, net, (ii) customer relationships, net, included in intangible assets subject to amortization, net, (iii) intangible assets not subject to amortization, and (iv) goodwill.
(b) Earnings were calculated by adding (i) pretax net income, (ii) interest expense, (iii) preferred stock dividend requirements of majority-owned companies, (iv) adjustments for partially owned subsidiaries and 50%-owned companies, and (v) the amount of undistributed losses (earnings) of TWC’s less than 50%-owned companies. The definition of earnings also applies to TWC’s unconsolidated 50%-owned affiliated companies. Fixed charges primarily consist of interest expense. Earnings, as defined, include significant noncash charges for depreciation and amortization primarily relating to the amortization of intangible assets recognized in business combinations.

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BRIGHT HOUSE

The following table presents selected historical consolidated financial data of Bright House. The selected financial data of Bright House for each of the years ended December 31, 2014, 2013 and 2012, and as of December 31, 2014 and 2013, are derived from Bright House’s audited consolidated financial statements for the year ended December 31, 2014, which are included in this joint proxy statement/prospectus. The selected financial data of Bright House for each of the years ended December 31, 2011 and 2010, and as of December 31, 2012, 2011 and 2010, have been derived from Bright House’s audited consolidated financial statements for such years. The audited financial statements have been audited by KPMG LLP, an independent auditor.

The selected financial data of Bright House as of March 31, 2015, and for the three months ended March 31, 2015 and March 31, 2014 are derived from BHN’s unaudited condensed consolidated financial statements and related notes, which are included in this joint proxy statement/prospectus. The selected financial data of Bright House as of March 31, 2014 are derived from Bright House’s unaudited condensed consolidated financial statements for such period. The unaudited financial data presented have been prepared on a basis consistent with Bright House’s audited consolidated financial statements. In the opinion of Bright House’s management, such unaudited financial data reflect all adjustments, subject only to normal and recurring year-end adjustments, necessary for a fair presentation of the results for those periods. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year or any future period. The following information should be read in conjunction with the historical consolidated financial statements and related notes (in millions).

 

     For and as of the
Three Months
Ended March 31,
     For and as of the Years Ended December 31,  
     2015      2014      2014      2013      2012      2011      2010  

Statement of Operations Data:

                    

Revenues

   $ 978       $ 917       $ 3,704       $ 3,508       $ 3,343       $ 3,203       $ 3,096   

Income from operations

   $ 199       $ 189       $ 790       $ 730       $ 686       $ 613       $ 539   

Net income

   $ 193       $ 180       $ 752       $ 719       $ 705       $ 527       $ 508   

Balance Sheet Data (end of period):

                    

Property, plant and equipment, net

   $ 2,162       $ 2,001       $ 2,131       $ 2,007       $ 1,989       $ 1,918       $ 1,986   

Total assets

   $ 4,638       $ 4,319       $ 4,421       $ 4,128       $ 3,741       $ 3,731       $ 3,958   

Total debt (including current portion)

   $ 514       $ 557       $ 514       $ 557       $ 600       $ 750       $ 750   

Member’s equity

   $ 3,212       $ 3,140       $ 3,016       $ 2,959       $ 2,474       $ 2,352       $ 2,671   

Other Financial Data (Unaudited):

                    

Ratio of earnings to fixed charges(a)

     20.8x         18.0x         18.6x         16.3x         13.1x         10.0x         9.1x   

 

(a) Earnings include income plus fixed charges. Fixed charges consist of interest expense and an estimated interest component of rent expense.

 

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COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

The following table sets forth selected historical and unaudited pro forma combined per share information for Charter and TWC.

Historical Per Share Information of Charter and TWC

The historical per share information of each of Charter and TWC below is derived from the audited consolidated financial statements of each of Charter and TWC as of and for the year ended December 31, 2014 and the unaudited condensed consolidated financial statements of each of Charter and TWC as of and for the three months ended March 31, 2015.

Unaudited Pro Forma Combined per Charter Common Share Data

The unaudited pro forma combined per Charter common share data set forth below gives effect to the mergers under the acquisition method of accounting, as if the transactions had occurred on January 1, 2014, the first day of Charter’s fiscal year ended December 31, 2014, in the case of net loss, and at March 31, 2015, in the case of book value per share data, and assuming that each outstanding share of TWC common stock had been converted into Charter Class A common stock based on the exchange ratio assuming TWC stockholders elect to receive $100 in cash and stock consideration based on the Option A Effective Exchange Ratio.

The unaudited pro forma combined per Charter common share data does not purport to represent the actual results of operations that Charter would have achieved had the companies been combined during these periods or to project the future results of operations that Charter may achieve after the consummation of the mergers.

Unaudited Pro Forma Combined per TWC Equivalent Share Data

The unaudited pro forma combined per TWC equivalent share data set forth below shows the effect of the mergers from the perspective of an owner of TWC common stock. The information was calculated by multiplying the unaudited pro forma combined per Charter common share amounts by the exchange ratio assuming TWC stockholders elect to receive $100 in cash and stock consideration based on the Option A Effective Exchange Ratio.

 

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Generally

You should read the below information in conjunction with the selected historical consolidated financial information included elsewhere in this joint proxy statement/prospectus and the historical consolidated financial statements of Charter and TWC and related notes that have been filed with the SEC, certain of which are incorporated by reference into this joint proxy statement/prospectus. See “Selected Historical Consolidated Financial Data of Charter,” “Selected Historical Consolidated Financial Data of TWC” and “Where You Can Find More Information.” The unaudited pro forma combined per Charter common share data and the unaudited pro forma combined per TWC equivalent share data is derived from, and should be read in conjunction with, the unaudited pro forma consolidated financial statements and related notes included in this joint proxy statement/prospectus. See “Unaudited Pro Forma Consolidated Financial Statements.”

 

     As of/For the
Three Months
Ended
March 31,
2015
    As of/For the
Year Ended
December 31,
2014
 

Charter Historical per Common Share Data:

    

Net loss—basic and diluted

   $ (0.73   $ (1.70

Book value(1)

   $ 0.69      $ 1.30   

TWC Historical per Common Share Data:

    

Net income—basic

   $ 1.60      $ 7.21   

Net income—diluted

   $ 1.59      $ 7.17   

Cash dividends paid

   $ 0.75      $ 3.00   

Book value(1)

   $ 28.84      $ 28.54   

Unaudited Pro Forma Combined per Charter Common Share Data(3):

    

Net loss—basic and diluted

   $ (0.60   $ (2.81

Book value(1)

   $ 122.62        N/A   

Unaudited Pro Forma Combined per TWC Equivalent Share Data(3):

    

Net loss—basic and diluted(2)

   $ (0.33   $ (1.52

Book value(1)(2)

   $ 66.33        N/A   

 

N/A—not applicable

 

(1) Amount is calculated by dividing shareholders’ equity by common shares or shares of common stock, as applicable, outstanding.
(2) Amounts calculated by multiplying unaudited pro forma combined per share amounts by the exchange ratio in the first merger, assuming TWC stockholders elect to receive $100 in cash and stock consideration based on the Option A Effective Exchange Ratio.
(3) Amounts calculated based on pro forma financial statements giving effect to the mergers and do not give effect to the BHN transactions.

 

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COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

Market Prices

The following table sets forth, for the calendar periods indicated, the high and low intra-day sales prices per share of Charter Class A common stock and per share of TWC common stock. Charter Class A common stock is listed on NASDAQ under the symbol CHTR. TWC’s common stock is listed on the New York Stock Exchange under the symbol TWC.

 

     Charter Class A
Common Stock
     TWC Common Stock  
     High      Low      High      Low  

2012:

           

First Calendar Quarter

   $ 65.32       $ 56.05       $ 81.75       $ 63.93   

Second Calendar Quarter

   $ 71.86       $ 59.04       $ 83.64       $ 73.52   

Third Calendar Quarter

   $ 83.41       $ 70.70       $ 96.57       $ 81.07   

Fourth Calendar Quarter

   $ 79.95       $ 67.06       $ 100.50       $ 89.06   

2013:

           

First Calendar Quarter

   $ 106.29       $ 76.19       $ 102.00       $ 84.57   

Second Calendar Quarter

   $ 128.57       $ 99.41       $ 113.06       $ 89.81   

Third Calendar Quarter

   $ 137.29       $ 119.06       $ 120.93       $ 106.01   

Fourth Calendar Quarter

   $ 144.02       $ 125.68       $ 139.85       $ 108.88   

2014:

           

First Calendar Quarter

   $ 140.74       $ 120.50       $ 147.28       $ 130.53   

Second Calendar Quarter

   $ 159.24       $ 116.78       $ 148.20       $ 132.58   

Third Calendar Quarter

   $ 167.30       $ 149.66       $ 155.32       $ 142.90   

Fourth Calendar Quarter

   $ 169.85       $ 137.51       $ 155.95       $ 128.78   

2015:

           

First Calendar Quarter

   $ 199.00       $ 149.47       $ 159.94       $ 134.21   

Second Calendar Quarter (through June 22, 2015)

   $ 194.00       $ 168.84       $ 184.89       $ 145.44   

The following table sets forth the closing price per share of Charter Class A common stock and of TWC common stock as of May 22, 2015, the last trading day before the public announcement of the merger agreement, and as of June 22, 2015, the most recent practicable trading day prior to the date of this joint proxy statement/prospectus. The table also shows the implied value of the merger consideration proposed for each share of TWC common stock as of the same two dates, after giving effect to the exchange ratios in the mergers. This implied value was calculated by multiplying the closing price of a share of Charter Class A common stock on the relevant date by the exchange ratio of 0.5409, and adding the resulting amount to the $100 cash portion of the merger consideration (for these purposes excluding the application of the Parent Merger Exchange Ratio of 0.9042).

 

     Charter Class A
Common Stock
     TWC Common
Stock
     Implied Per Share
Value of Merger
Consideration
 

May 22, 2015

   $ 175.33       $ 171.18       $ 194.84   

June 22, 2015

   $ 170.31       $ 178.00       $ 192.12   

The market prices of shares of Charter Class A common stock and TWC common stock have fluctuated since the date of the announcement of the merger agreement and will continue to fluctuate from the date of this joint proxy statement/prospectus to the date of the TWC special meeting, the date of the Charter special meeting and the date the mergers are completed, and the market prices of shares of New Charter Class A common stock will continue to fluctuate after the date the mergers are completed. No assurance can be given concerning the market prices of Charter Class A common stock and TWC common stock before completion of the mergers or New Charter Class A common stock after completion of the mergers. The exchange ratios are fixed in the merger

 

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agreement, but the market price of Charter Class A common stock (and therefore the value of the merger consideration) when received by TWC stockholders after the mergers are completed could be greater than, less than or the same as shown in the table above. Accordingly, TWC stockholders are advised to obtain current market quotations for Charter Class A common stock and TWC common stock in deciding whether to vote for the approval of the adoption of the merger agreement.

Dividends

Charter has not paid stock or cash dividends on any of its common stock. Charter (and New Charter) would be dependent on distributions from its subsidiaries if either company were to make any dividends. Covenants in the indentures and credit agreements governing the debt obligations of their subsidiaries restrict their ability to make distributions, and accordingly, limit their ability to declare or pay cash dividends. Future cash dividends, if any, will be at the discretion of Charter’s or New Charter’s board of directors and will depend upon, among other things, future operations and earnings, capital requirements, general financial condition, contractual restrictions and such other factors as Charter’s board of directors may deem relevant.

TWC currently pays a quarterly dividend on TWC common stock, and last declared a quarterly dividend on June 20, 2015, of $0.75 per share. Under the terms of the merger agreement, during the period before completion of the mergers, TWC is not permitted to declare, set aside or pay any dividend or other distribution other than its regular quarterly cash dividend in the ordinary course of business consistent with past practice in an amount not to exceed $0.75 per share per quarter.

Any former TWC stockholder who holds the Charter Class A common stock into which TWC common stock has been converted in connection with the mergers will receive whatever dividends are declared and paid on Charter Class A common stock after completion of the mergers. However, no dividend or other distribution having a record date after completion of the mergers will actually be paid with respect to any Charter Class A common stock into which TWC common stock has been converted in connection with the mergers until the certificates formerly representing shares of TWC common stock have been surrendered (or the book-entry shares formerly representing shares of TWC common stock have been transferred), at which time any accrued dividends and other distributions on those shares of Charter Class A common stock will be paid without interest. Subject to the limitations set forth in the merger agreement, any future dividends by Charter will be made at the discretion of the Charter board of directors. Subject to the limitations set forth in the merger agreement, any future dividends by TWC will be made at the discretion of the TWC board of directors. There can be no assurance that any future dividends will be declared or paid by Charter, New Charter or TWC as to the amount or timing of those dividends, if any.

 

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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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BHN Transactions

In the BHN transactions, A/N will receive approximately 34.3 million shares of Charter Holdings common units, approximately 10.3 million Charter Holdings convertible preferred units, both subject to application of the Parent Merger Exchange Ratio, and approximately $2.0 billion in cash. For purposes of these unaudited pro forma financial statements, the Bright House preliminary purchase price is assumed to be $10.7 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, the Charter Holdings common units are valued at approximately $6.1 billion. The issuance of Charter Holdings convertible preferred units are valued for pro forma purposes based on their $2.5 billion aggregate liquidation preference. The approximately $2.0 billion cash portion of the BHN transactions will be financed with new indebtedness of New Charter. The BHN transactions exclude certain assets and liabilities such as cash, marketable securities and pension-related assets and liabilities, among others. The fair value of the BHN transactions for accounting purposes will be based on the fair value of the Charter Holdings common units and the Charter Holdings convertible preferred units 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 fair value of the Charter Holdings common units and convertible preferred units will result in a $432 million change in the fair value of the total consideration for accounting purposes.

Liberty Transactions and Committed Financing

In connection with the TWC transactions, 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 transactions to partially finance the cash portion of the TWC transactions consideration. New Charter will issue shares to Liberty Broadband equivalent to approximately 24.3 million shares of Charter Class A common stock. In connection with the BHN transactions, Liberty Broadband agreed to purchase at the closing of the BHN transactions $700 million of New Charter Class A common stock (or, if the mergers are not consummated prior to the completion of the BHN transactions, Charter Class A common stock). New Charter (or, if applicable, Charter) will issue shares to Liberty Broadband equivalent to approximately 4.0 million shares of Charter in connection with such $700 million investment.

To fund the remaining cash portions of the TWC transactions and BHN transactions, Charter has received commitments from a number of leading investment banks to provide incremental senior secured term loan facilities totaling up to $15.0 billion and a senior secured incremental revolving facility equal to $1.7 billion under Charter’s existing credit facility. In addition, the commitments provide for up to $13.8 billion of bridge financing in the event Charter is unable to issue senior secured and unsecured notes in advance of the closing of the transactions, inclusive of a $4.3 billion bridge facility for TWC stockholders who elect the Option B Election. For purposes of these unaudited pro forma financial statements, Charter has assumed issuing approximately 90% in new first lien debt (including bank debt and senior secured notes) and approximately 10% in unsecured notes at current market interest rates. The indebtedness assumptions used herein are for illustrative purposes only and may not reflect the actual financing when completed.

Basis of Presentation

The unaudited pro forma financial statements are based on (i) the unaudited condensed consolidated financial statements of Charter Communications, Inc. and its subsidiaries as of and for the three months ended March 31, 2015 contained in Charter’s Quarterly Report on Form 10-Q filed with the SEC on May 1, 2015, (ii) the unaudited consolidated financial statements of Time Warner Cable Inc. as of and for the three months ended March 31, 2015 contained in TWC’s Quarterly Report on Form 10-Q filed with the SEC on April 30, 2015, (iii) the condensed consolidated unaudited financial statements of Bright House Networks, LLC and its subsidiaries as of and for the three months ended March 31, 2015 contained in this joint proxy statement/prospectus, (iv) the audited consolidated financial statements of Charter Communications, Inc. and its subsidiaries for the year ended December 31, 2014 contained in Charter’s Annual Report on Form 10-K filed with the SEC on February 23, 2015, (v) the audited consolidated financial statements of Time Warner Cable Inc.

 

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for the year ended December 31, 2014 contained in TWC’s Annual Report on Form 10-K filed with the SEC on February 13, 2015, and (vi) the audited consolidated financial statements of Bright House Networks, LLC and its subsidiaries for the year ended December 31, 2014 contained in this joint proxy statement/prospectus.

The TWC transactions and BHN transactions will be accounted for using the acquisition method of accounting with Charter as the accounting acquirer. The unaudited pro forma financial statements reflect the preliminary assessment of fair values and useful lives assigned to the assets acquired and liabilities assumed. The fair values assigned in the unaudited pro forma financial statements are preliminary and represent Charter’s current best estimate of fair values and are subject to revision. The detailed valuation studies necessary to arrive at the required estimates of the fair values for the assets acquired and liabilities assumed have not commenced. Significant assets and liabilities that are subject to preparation of valuation studies to determine appropriate fair value adjustments include property, plant and equipment and identifiable intangible assets, including franchises and customer relationships. Changes to the fair values of these assets and liabilities will also result in changes to goodwill and deferred tax liabilities.

The unaudited pro forma financial statements are provided for illustrative purposes only and are based on available information and assumptions that Charter believes are reasonable and do not purport to represent what the actual consolidated results of operations or the consolidated financial position of Charter would have been had the TWC transactions and BHN transactions occurred on the dates indicated, nor are they necessarily indicative of future consolidated results of operations or consolidated financial position. The actual financial position and results of operations will differ, perhaps significantly, from the pro forma amounts reflected herein due to a variety of factors, including access to additional information, changes in value not currently identified and changes in operating results following the date of the pro forma financial statements.

Items Not Adjusted in the Unaudited Pro Forma Financial Statements

The unaudited pro forma financial statements do not reflect all reclassifications or adjustments to conform the TWC or Bright House financial statement presentation or accounting policies to those adopted by Charter. At this time, Charter is not aware of any intercompany transactions that would have a material impact on the unaudited pro forma financial statements that are not reflected in the pro forma adjustments. Further review may identify additional intercompany transactions, reclassifications or differences between the accounting policies of the companies that, when conformed, could have a material impact on the unaudited pro forma financial statements of the combined company.

The unaudited pro forma financial statements do not include any adjustment for liabilities or related costs that may result from integration activities, since management has not completed the process of making these assessments. Significant liabilities and related costs may ultimately be recorded for employee severance or relocation, costs of vacating some facilities and costs associated with other exit and integration activities. The unaudited pro forma statements of operations do not include any revenue or expense synergies or dis-synergies resulting from the TWC transactions and BHN transactions, including programming costs or shared functions and other administrative and overhead allocations, as these adjustments are not factually supportable. The unaudited pro forma statements of operations also do not include an estimated $536 million and $30 million of non-recurring costs to be incurred directly attributable to the TWC transactions and the BHN transactions, respectively, such as escrow interest, investment banking fees and legal fees.

Charter intends to review the synergies of the combined businesses in advance of and subsequent to the completion of the TWC transactions and BHN transactions, which may result in a plan to reorganize certain of TWC’s, Bright House’s or Charter’s products, network, service operations and organizational structure. The costs of implementing such a plan, if it were to occur, and any resulting future changes in revenue or cost savings have not been reflected in the unaudited pro forma financial statements.

In connection with the BHN transactions, New Charter and A/N will enter into a tax receivable agreement which will apply to an exchange or sale of the Charter Holdings common and convertible preferred units between

 

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the parties. The tax receivable agreement will provide for a payment by New Charter to A/N of 50% of the tax benefit that is realized by New Charter from the step-up in tax basis resulting from the future exchange or sale. Charter has not recorded a pro forma adjustment for this contingent consideration obligation in the preliminary purchase price allocation as it is impractical to estimate its fair value since the tax benefit is dependent on uncertain future events that are outside New Charter’s control. A future exchange or sale is not based on a fixed and determinable date and the exchange or sale is not certain to occur. If and when an exchange or sale occurs in the future, the undiscounted value of the obligation is estimated to be in the range of zero to $2 billion depending on measurement of the tax step-up in the future and New Charter’s ability to realize the tax benefit in the subsequent periods following the exchange or sale.

The unaudited pro forma financial statements do not reflect adjustments related to the impact of the termination of the transactions Charter entered into with Comcast Corporation in April 2014 as such adjustments are not directly related to the TWC transactions, BHN transactions or Liberty transactions. The unaudited pro forma consolidated balance sheet is not adjusted for the repayment of $3.5 billion aggregate principal amount of CCOH Safari, LLC notes and $3.5 billion aggregate principal amount of CCO Safari, LLC Term G Loans that were held in escrow and intended to fund the closing of the transactions with Comcast. As of March 31, 2015, the proceeds from the escrowed debt were classified as restricted cash and cash equivalents and current portion of long-term debt in the unaudited pro forma consolidated balance sheet. The transactions we entered into with Comcast were terminated in April 2015 and the CCOH Safari, LLC notes and CCO Safari, LLC Term G Loans were subsequently repaid in April 2015. The unaudited pro forma consolidated statements of operations are not adjusted to eliminate approximately $86 million and $75 million of interest expense associated with the escrowed debt for the three months ended March 31, 2015 and year ended December 31, 2014, respectively. The unaudited pro forma consolidated statements of operations are also not adjusted to eliminate approximately $13 million and $38 million of transaction costs incurred by Charter and $24 million and $195 million of transaction costs incurred by TWC directly related to the transactions with Comcast for the three months ended March 31, 2015 and year ended December 31, 2014, respectively.

 

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CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

AS OF MARCH 31, 2015

(IN MILLIONS)

 

    Charter
Historical
    TWC     TWC
Pro Forma
Adjustments
        Charter
Pro Forma
    Bright
House
    Bright
House
Pro Forma
Adjustments
        Charter
Pro Forma
As Adjusted
 
ASSETS                  

CURRENT ASSETS:

                 

Cash and cash equivalents

  $ 20      $ 547      $ (547   1a   $ 20      $ 854      $ (854   2a   $ 20   

Restricted cash and cash equivalents

    7,112        —          —            7,112        —          —            7,112   

Accounts receivable, net

    264        811        —            1,075        157        —            1,232   

Prepaid expenses and other current assets

    106        648        (10   1a     744        173        (136   2a     781   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Total current assets

  7,502      2,006      (557   8,951      1,184      (990   9,145   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

INVESTMENT IN CABLE PROPERTIES:

Property, plant and equipment, net

  8,275      16,207      4,052    1b   28,534      2,162      541    2b   31,237   

Franchises

  6,006      26,012      21,659    1b   53,677      802      3,799    2b   58,278   

Customer relationships, net

  1,042      314      17,479    1b   18,835      —        1,712    2b   20,547   

Goodwill

  1,168      3,137      22,835    1b   27,140      13      1,706    2b   28,859   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Total investment in cable properties, net

  16,491      45,670      66,025      128,186      2,977      7,758      138,921   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

OTHER NONCURRENT ASSETS

  417      654      604    1c   1,675      477      (303 2c   1,849   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Total assets

$ 24,410    $ 48,330    $ 66,072    $ 138,812    $ 4,638    $ 6,465    $ 149,915   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 
LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accounts payable and accrued liabilities

$ 1,586    $ 3,512    $ (27 1d $ 5,071    $ 429    $ (9 2d $ 5,491   

Current portion of long-term debt

  6,983      647      (647 1e   6,983      43      (43 2d   6,983   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Total current liabilities

  8,569      4,159      (674   12,054      472      (52   12,474   

LONG-TERM DEBT

  13,981      22,639      26,153    1e   62,773      471      901    2e   64,145   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

DEFERRED INCOME TAXES

  1,706      12,616      13,213    1f   27,535      —        —      2f   27,535   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

OTHER LONG-TERM LIABILITIES

  77      772      (412 1g   437      483      (483 2g   437   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

SHAREHOLDERS’ EQUITY

Noncontrolling interest

  —        4      (2 1h   2      —        8,641    2h   8,643   

Controlling interest

  77      8,140      27,794    1i   36,011      3,212      (2,542 2i   36,681   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Total shareholders’ equity

  77      8,144      27,792      36,013      3,212      6,099      45,324   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Total liabilities and shareholders’ equity

$ 24,410    $ 48,330    $ 66,072    $ 138,812    $ 4,638    $ 6,465    $ 149,915   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

 

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CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2015

(IN MILLIONS)

 

    Charter
Historical
    TWC     TWC
Pro Forma
Adjustments
        Charter
Pro Forma
    Bright
House
    Bright
House

Pro Forma
Adjustments
        Charter
Pro Forma
As Adjusted
 

REVENUES:

                 

Video

  $ 1,129      $ 2,469      $ —          $ 3,598      $ 412      $ —          $ 4,010   

Internet

    717        1,696        —            2,413        313        —            2,726   

Voice

    134        473        —            607        99        —            706   

Commercial

    269        781        —            1,050        110        —            1,160   

Advertising sales

    66        230        (14   3a     282        42        —            324   

Other

    47        128        54      3a     229        2        (23   4a     208   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Total revenues

  2,362      5,777      40      8,179      978      (23   9,134   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

COSTS AND EXPENSES:

Operating costs and expenses (exclusive of items shown separately below)

  1,581      3,781      43    3a   5,405      668      (70 4a   6,003   

Depreciation and amortization

  514      886      749    3b   2,149      111      78    4b   2,338   

Other operating expenses, net

  18      26      —        44      —        (4 4c   40   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 
  2,113      4,693      792      7,598      779      4      8,381   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Income from operations

  249      1,084      (752   581      199      (27   753   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

OTHER INCOME (EXPENSES):

Interest expense, net

  (289   (348   (211 3c   (848   (7   (2 4d   (857

Loss on derivatives instruments, net

  (6   —        —        (6   —        —        (6

Other income, net

  —        10      —        10      1      —        11   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 
  (295   (338   (211   (844   (6   (2   (852
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Income (loss) before taxes

  (46   746      (963   (263   193      (29   (99

Income tax benefit (expense)

  (35   (288   426    3d   103      —        (55 4e   48   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Consolidated net income (loss)

  (81   458      (537   (160   193      (84   (51

Less: Noncontrolling interest expense

  —        —        —        —        —        (24 4f   (24
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Net income (loss) before non-recurring charges directly attributable to the Transactions

$ (81 $ 458    $ (537 $ (160 $ 193    $ (108 $ (75
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

LOSS PER COMMON SHARE, BASIC AND DILUTED

$ (0.73 $ (0.60 $ (0.28
 

 

 

         

 

 

         

 

 

 

Weighted average common shares outstanding, basic and diluted

  111,655,617      153,555,391    3e   265,211,008      3,658,691    4g   268,869,699   
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

 

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CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2014

(IN MILLIONS)

 

    Charter
Historical
    TWC     TWC
Pro Forma
Adjustments
        Charter
Pro Forma
    Bright
House
    Bright
House
Pro Forma
Adjustments
        Charter
Pro Forma
As Adjusted
 

REVENUES:

                 

Video

  $ 4,443      $ 10,002      $ —          $ 14,445      $ 1,545      $ —          $ 15,990   

Internet

    2,576        6,428        —            9,004        1,164        —            10,168   

Voice

    575        1,932        —            2,507        392        —            2,899   

Commercial

    993        2,838        —            3,831        405        —            4,236   

Advertising sales

    341        1,127        (72   3a     1,396        170        —            1,566   

Other

    180        485        201      3a     866        28        (88   4a     806   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Total revenues

  9,108      22,812      129      32,049      3,704      (88   35,665   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

COSTS AND EXPENSES:

Operating costs and expenses (exclusive of items shown separately below)

  5,973      14,584      226    3a   20,783      2,503      (257 4a   23,029   

Depreciation and amortization

  2,102      3,371      3,564    3b   9,037      416      377    4b   9,830   

Other operating (income) expenses, net

  62      225      —        287      (5   —        282   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 
  8,137      18,180      3,790      30,107      2,914      120      33,141   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Income from operations

  971      4,632      (3,661   1,942      790      (208   2,524   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

OTHER INCOME (EXPENSES):

Interest expense, net

  (911   (1,419   (846 3c   (3,176   (38   3    4d   (3,211

Loss on derivatives instruments, net

  (7   —        —        (7   —        —        (7

Other income, net

  —        35      —        35      —        —        35   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 
  (918   (1,384   (846   (3,148   (38   3      (3,183
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Income (loss) before taxes

  53      3,248      (4,507   (1,206   752      (205   (659

Income tax benefit (expense)

  (236   (1,217   1,923    3d   470      —        (186 4e   284   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Consolidated net income (loss)

  (183   2,031      (2,584   (736   752      (391   (375

Less: Noncontrolling interest expense

  —        —        —        —        —        (69 4f   (69
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Net income (loss) before non-recurring charges directly attributable to the Transactions

$ (183 $ 2,031    $ (2,584 $ (736 $ 752    $ (460 $ (444
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

LOSS PER COMMON SHARE, BASIC AND DILUTED

$ (1.70 $ (2.81 $ (1.67
 

 

 

         

 

 

         

 

 

 

Weighted average common shares outstanding, basic and diluted

  108,374,160      153,869,754    3e   262,243,914      3,658,691    4g   265,902,605   
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

 

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Notes to Unaudited Pro Forma Financial Statements

Note 1. TWC Transactions Pro Forma Balance Sheet Adjustments

The unaudited pro forma consolidated balance sheet has been adjusted to reflect the estimated fair values of the identifiable assets acquired and liabilities assumed in the TWC transactions. The preliminary purchase price is estimated to be approximately $56.4 billion for purposes of the unaudited pro forma financial statements. 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 closing and will be different from the assumed value presented in the unaudited pro forma financial statements. The table below presents the preliminary purchase price for pro forma purposes based on the June 1, 2015 outstanding shares of TWC common stock and equity awards and June 1, 2015 Charter closing price. For purposes of these notes, Liberty means Liberty Broadband and Liberty Interactive.

Preliminary Purchase Price (in millions, except per share data)

 

Outstanding shares of TWC common stock (excluding Liberty) as of June 1, 2015

  275.1   

Share exchange ratio

  0.5409   
  

 

 

 

Equivalent shares of Charter Class A common stock to be issued (excluding Liberty)

  148.8   

Charter closing price per share as of June 1, 2015

$ 179.15   
  

 

 

 

Estimated fair value of Charter Class A common stock to be issued (excluding Liberty)

$ 26,660   
  

 

 

 

Outstanding shares of TWC common stock held by Liberty as of June 1, 2015

  7.7   

Share exchange ratio

  1.1060   
  

 

 

 

Equivalent shares of Charter Class A common stock to be issued to Liberty

  8.5   

Charter closing price per share as of June 1, 2015

$ 179.15   
  

 

 

 

Estimated fair value of Charter Class A common stock to be issued to Liberty

$ 1,530   
  

 

 

 

Total estimated fair value of Charter Class A common stock to be issued

$ 28,190   

Outstanding shares of TWC common stock (excluding Liberty) as of June 1, 2015

  275.1   

$100 cash portion per share

$ 100.00   
  

 

 

 

Cash paid to TWC stockholders (excluding Liberty)

$ 27,512   

Pre-combination vesting period fair value of New Charter equity replacement awards issued to TWC employees in exchange for TWC equity awards

$ 607   

Cash paid for TWC non-employee equity awards

$ 118   
  

 

 

 

Total preliminary purchase price

$ 56,427   
  

 

 

 

 

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The table below presents a preliminary allocation of purchase price to the assets acquired and liabilities assumed as if the TWC transactions had closed on March 31, 2015.

Preliminary Allocation of Purchase Price (in millions)

 

Current assets

$ 1,996   

Property, plant and equipment, net

  20,259   

Franchises

  47,671   

Customer relationships, net

  17,793   

Goodwill

  25,972   

Other noncurrent assets

  995   

Current liabilities

  (3,485

Long-term debt assumed

  (25,210

Deferred income taxes

  (29,202

Other long-term liabilities

  (360

Noncontrolling interest

  (2
  

 

 

 
$ 56,427   
  

 

 

 

The preliminary estimates are based on currently available information and prior valuation history. As such, additional assets and liabilities may be identified and reflected in the final purchase price allocation.

Upon completion of the fair value assessment following the closing of the TWC transactions, Charter anticipates the finalized fair values of the net assets acquired will differ from the preliminary assessment outlined above. Generally, changes to the initial estimates of the fair value of the assets acquired and liabilities assumed will be recorded as adjustments to those assets and liabilities and residual amounts will be allocated to goodwill. If upon completion of the valuations, the fair values are 10% greater or less than the amounts included in the preliminary purchase price allocation above, such a change would not likely have a material impact on the financial position or results of operations of New Charter.

The following summarizes the pro forma balance sheet adjustments relating to the TWC transactions.

 

(a) Adjustment of $547 million to cash and cash equivalents represents the use of TWC’s cash and cash equivalents to reduce the amount of debt issued to fund the TWC transactions. No fair value adjustments are reflected in accounts receivable, net, as carrying value is estimated to approximate fair value. Adjustment of $10 million to prepaid expenses and other current assets represents eliminating the current portion of TWC deferred financing fees as a result of adjusting TWC’s long-term debt to fair value.

 

(b) For purposes of the preliminary purchase price allocation, Charter assumed a 25% increase to the net book value of TWC’s property, plant and equipment. This assumption is based on increases to net book values reflected in valuations previously performed on Charter assets. The fair values of TWC’s franchises and customer relationships were based on previous valuations of Charter assets performed for general business purposes that were allocated to the TWC cable systems by applying a relative percentage of purchase price allocated to the intangible assets. Goodwill represents the residual of the purchase price over the fair values of the identified assets acquired and liabilities assumed.

 

(c) Other noncurrent assets reflect the following adjustments (in millions).

 

Adjust TWC’s equity investments to estimated fair value

$ 433   

Deferred financing fees associated with newly issued debt

  263   

Elimination of TWC deferred financing fees relating to assumed TWC debt

  (90

Elimination of Charter’s cost investment in a TWC subsidiary

  (2
  

 

 

 
$ 604   
  

 

 

 

 

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The estimated fair value of TWC’s equity investments was based on applying implied multiples to estimated cash flows. The implied multiples were estimated based on precedent transactions and comparable companies. Acquisition accounting rules require that the increase in the carrying value of the TWC equity investments be allocated to the underlying net assets of the investees. This allocation has not yet been performed, and for pro forma purposes, is allocated to non-amortizing goodwill of the investees and thus no pro forma adjustment related to these investments is reflected in the unaudited pro forma consolidated statements of operations.

 

(d) Adjustment of $27 million to accounts payable and accrued liabilities represents the elimination of current deferred revenue as it is assumed to have no fair value as there are no associated payment obligations or substantive performance obligations.

 

(e) The TWC long-term debt assumed was adjusted to fair value using quoted market values as of June 1, 2015. This adjustment resulted in an increase in long-term debt of $1.9 billion. The fair value adjustment to long-term debt is a result of quoted market values of TWC’s debt being higher than the face amount of the related debt. The quoted market value of a debt instrument is higher than the face amount of the debt when the market interest rates are lower than the stated interest rate of the debt. In acquisition accounting, this results in an increase in debt and a reduction in interest expense to reflect the lower market interest rate.

The pro forma adjustment to reclassify $647 million of TWC’s current portion of long-term debt to long-term debt is a result of conforming to Charter’s balance sheet classification. When Charter has availability to repay debt maturing in the next twelve months with its existing revolving credit facility, which is anticipated to be the case following the TWC transactions, those current maturities are classified as long-term debt. Long-term debt was also adjusted to reflect new debt raised to fund the TWC transactions.

The following table presents pro forma cash sources and uses as a result of the TWC transactions.

Pro Forma Cash Sources and Uses (in millions)

 

Sources:

Proceeds from issuance of long-term debt

$ 23,582   

Proceeds from issuance of Charter Class A common stock to Liberty

  4,300   

TWC cash and cash equivalents assumed

  547   
  

 

 

 
$ 28,429   
  

 

 

 

Uses:

Cash portion of purchase price

$ 27,630   

Advisor fees and other expenses directly related to the TWC transactions

  536   

Deferred financing fees

  263   
  

 

 

 
$ 28,429   
  

 

 

 

 

(f) Pro forma adjustments to deferred tax liabilities reflect the following (in millions):

 

Deferred tax liabilities from TWC acquisition accounting adjustments

$ 16,586   

Reduction in valuation allowance on Charter’s preexisting deferred tax assets

  (3,128

Other deferred taxes recorded directly to equity

  (245
  

 

 

 
$ 13,213   
  

 

 

 

The TWC transactions are assumed to be a non-taxable business combination for pro forma purposes. A pro forma adjustment was recorded for the deferred tax impact of acquisition accounting adjustments primarily related to property, plant and equipment, franchises, customer relationships and assumed TWC long-term debt. The incremental deferred tax liabilities of $16.6 billion were calculated based on the tax effect of an

 

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approximate $42.5 billion step-up in book basis of net assets of TWC excluding the amount attributable to goodwill. This deferred tax pro forma adjustment was determined by applying an estimated tax rate of 39%.

In contemplation of the TWC transactions, Charter has performed a preliminary analysis of the valuation allowance recorded on Charter’s preexisting deferred tax assets. Based on this analysis, certain of the deferred tax liabilities recognized in connection with the TWC transactions are expected to reverse and provide a source of future taxable income, resulting in a $3.1 billion reduction of substantially all of Charter’s preexisting valuation allowance associated with its deferred tax assets. Such reduction in Charter’s valuation allowance is reflected as a reduction to deferred tax liabilities in the pro forma balance sheet as a result of the TWC transactions and was determined by applying an estimated tax rate of 39%. The impact of the reduction in the valuation allowance is not reflected in the unaudited pro forma consolidated statements of operations as it is non-recurring.

Other deferred taxes recorded directly to equity include $163 million of estimated tax benefit on advisor fees and other transaction expenses, $46 million of excess tax benefit relating to cash paid for TWC non-employee equity awards and $36 million of tax benefit upon remeasuring Charter’s legacy deferred taxes at a 39.0% New Charter estimated tax rate compared to a 39.5% legacy Charter tax rate due to estimated changes in apportionment factors related to state income taxes. The adjustment to legacy Charter’s deferred taxes as a result of the tax rate remeasurement is not reflected in the unaudited pro forma consolidated statements of operations as it is non-recurring.

Deferred taxes recognized in connection with the TWC transactions reflect currently available information as well as estimates and assumptions made in accordance with the basis of presentation of the unaudited pro forma financial statements. The final deferred tax liability recognized in connection with the TWC transactions could be significantly different.

 

(g) Adjustment to other long-term liabilities represents the elimination of deferred liabilities assumed to have no fair value as there are no associated payment obligations or substantive performance obligations.

 

(h) Represents the elimination of Charter’s noncontrolling interest in a TWC subsidiary.

 

(i) Pro forma adjustments to controlling interest of shareholders’ equity reflects the following (in millions).

 

Elimination of TWC’s historical shareholders’ equity and accumulated other comprehensive loss

$ (8,140

Exchange of New Charter Class A common stock to TWC stockholders (including Liberty)

  28,190   

Issuance of New Charter Class A common stock to Liberty

  4,300   

Reduction in valuation allowance on Charter’s existing deferred tax assets (see Note 1(f))

  3,128   

Advisor fees and other expenses directly related to the TWC transactions

  (536

Pre-combination vesting period fair value of New Charter equity replacement awards issued to TWC employees in exchange for TWC equity awards

  607   

Other deferred taxes recorded directly to equity (see Note 1(f))

  245   
  

 

 

 
$ 27,794   
  

 

 

 

Advisor fees and other expenses directly related to the TWC transactions of $536 million are not reflected in the unaudited pro forma statements of operations and consist primarily of escrow interest, investment banking fees and legal fees.

At closing, TWC employee equity awards will be converted into equity replacement awards with respect to New Charter Class A common stock with an estimated pre-combination vesting period fair value of $607 million. The estimated fair value of the post-combination portion of the awards totaling $614 million will be amortized to stock compensation expense over the remaining vesting period of the awards.

Note 2. BHN Transactions Pro Forma Balance Sheet Adjustments

The unaudited pro forma consolidated balance sheet has been adjusted to reflect the estimated fair values of the identifiable assets acquired and liabilities assumed in the BHN transactions. The preliminary purchase price

 

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of Bright House is assumed to be approximately $10.7 billion for purposes of the unaudited pro forma financial statements. The BHN transactions exclude certain assets and liabilities such as cash, marketable securities, pension-related assets and liabilities, and debt, among others. The fair value of the BHN transactions for accounting purposes will be based on the fair value of the Charter Holdings common units and the Charter Holdings convertible preferred units at the date of close and will be different from the assumed value presented in these unaudited pro forma financial statements. The table below presents the preliminary purchase price for pro forma purposes based on the June 1, 2015 Charter closing share price.

Preliminary Purchase Price (in millions, except per share data)

 

Charter Holdings common units issued to A/N (before the Parent Merger Exchange Ratio)

  34.3   

Charter closing price per share as of June 1, 2015

$ 179.15   
  

 

 

 

Estimated fair value of Charter Holdings common units issued to A/N based on Charter share price

$ 6,141   

Estimated fair value of convertible preferred units based on $2.5 billion aggregate liquidation preference

$ 2,500   

Cash paid to A/N

$ 2,014   
  

 

 

 

Total preliminary purchase price

$ 10,655   
  

 

 

 

The table below presents the preliminary allocation of purchase price to the assets acquired and liabilities assumed for the Bright House cable systems as if the BHN transactions had closed on March 31, 2015.

Preliminary Allocation of Purchase Price (in millions)

 

Current assets

$ 194   

Property, plant and equipment, net

  2,703   

Franchises

  4,601   

Customer relationships, net

  1,712   

Goodwill

  1,719   

Other noncurrent assets

  146   

Current liabilities

  (420
  

 

 

 
$ 10,655   
  

 

 

 

The preliminary estimates are based on currently available information and prior valuation history. As such, additional assets and liabilities may be identified and reflected in the final purchase price allocation.

Upon completion of the fair value assessment following the closing of the BHN transactions, Charter anticipates the finalized fair values of the net assets acquired will differ from the preliminary assessment outlined above. Generally, changes to the initial estimates of the fair value of the assets acquired and liabilities assumed will be recorded as adjustments to those assets and liabilities and residual amounts will be allocated to goodwill. If upon completion of the valuations, the fair values are 10% greater or less than the amounts included in the preliminary purchase price allocation above, such a change would not likely have a material impact on the financial position or results of operations of New Charter.

The following summarizes the pro forma balance sheet adjustments relating to the BHN transactions.

 

(a) Adjustment to current assets represents the elimination of assets not assumed in the BHN transactions, consisting primarily of $854 million of cash and cash equivalents, $114 million of short-term marketable securities and $22 million of short-term parent company receivables. No fair value adjustments are reflected in accounts receivable, net, as carrying value is estimated to approximate fair value.

 

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(b) For purposes of the preliminary purchase price allocation, Charter assumed a 25% increase to the net book value of Bright House’s property, plant and equipment. Charter based this assumption on increases to net book values reflected in valuations previously performed on Charter assets adjusting for differences in capitalization policies. The fair values of Bright House’s franchises and customer relationships were based on previous valuations of Charter assets performed for general business purposes which were allocated to the Bright House cable systems by applying a relative percentage of purchase price allocated to the intangible assets. Goodwill represents the residual of the purchase price over the fair value of the identified assets acquired and liabilities assumed.

 

(c) Adjustment to other noncurrent assets represents the elimination of $361 million of long-term marketable securities not assumed in the BHN transactions and elimination of BHN deferred financing fees of $2 million, partially offset by an increase of $32 million to adjust Bright House’s equity investments to fair value and $28 million of deferred financing fees associated with the issuance of new debt as noted below.

 

(d) Adjustment to total current liabilities represents the elimination of liabilities not assumed in the BHN transactions consisting of $3 million of current pension obligation, $6 million of accrued interest and $43 million of current portion of long-term debt.

 

(e) Adjustment to long-term debt represents the elimination of Bright House’s long-term debt not assumed in the BHN transactions and the issuance of new debt to partially fund the BHN transactions. The table below represents the following pro forma cash sources and uses as a result of the BHN transactions.

Pro Forma Cash Sources and Uses (in millions)

 

Sources:

Proceeds from the issuance of long-term debt

$ 2,000   

Issuance of New Charter Class A common stock to Liberty

  700   
  

 

 

 
$ 2,700   
  

 

 

 

Uses:

Cash portion of purchase price paid to A/N

$ 2,014   

Repayment of Charter Operating’s revolving credit facility

  628   

Advisor fees and other expenses directly related to the BHN transactions

  30   

Deferred financing fees

  28   
  

 

 

 
$ 2,700   
  

 

 

 

 

(f) The BHN transaction is assumed to be a non-taxable business combination for pro forma purposes. No pro forma adjustment was recorded to net deferred tax liabilities directly attributable to the BHN transactions in the unaudited pro forma consolidated balance sheet. New Charter’s difference between book and tax basis in its investment in the Charter Holdings partnership, and underlying net assets, is not anticipated to change following A/N’s contribution of the Bright House assets and liabilities. New Charter will record net deferred tax liabilities related to its investment, and its underlying net assets, in Charter Holdings following the BHN transactions based on future differences that arise between book and tax.

 

(g) Represents the elimination of $450 million of pension and other benefits related to long-term liabilities not assumed and the elimination of $33 million of other long-term deferred liabilities assumed to have no fair value as there are no associated payment obligations or substantive performance obligations.

 

(h) Adjustment to noncontrolling interest reflects the following adjustments (in millions).

 

Issuance of Charter Holdings common units to A/N

$ 6,141   

Issuance of Charter Holdings convertible preferred units to A/N

  2,500   
  

 

 

 
$ 8,641   
  

 

 

 

 

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Charter Holdings will issue approximately 34.3 million common units, subject to application of the Parent Merger Exchange Ratio, that are exchangeable into New Charter Class A common stock on a one-for-one basis, which are valued at approximately $6.1 billion for pro forma purposes, based on Charter’s closing stock price on June 1, 2015 of $179.15. These units are recorded in noncontrolling interest as permanent equity on the unaudited pro forma consolidated balance sheet. The actual value of the Charter Holdings common units for accounting purposes will be based on the closing price of Charter’s Class A common stock on the date of closing of the BHN transactions and will be different from the assumed value presented in the unaudited pro forma financial statements.

Charter Holdings will issue approximately 10.3 million convertible preferred units valued for pro forma purposes based on their $2.5 billion aggregate liquidation preference. These units are recorded in noncontrolling interest as permanent equity on the unaudited pro forma consolidated balance sheet. The preferred units are convertible into 10.3 million Charter Holdings common units based on a conversion feature as defined in the BHN contribution agreement and further exchangeable into 10.3 million New Charter Class A common stock, subject to application of the Parent Merger Exchange Ratio, on a one-for-one basis. The actual value of the Charter Holdings preferred units for accounting purposes will be recorded at fair value at the date of closing and will be different from the assumed value presented in the unaudited pro forma financial statements.

 

(i) Pro forma adjustment to controlling interest of shareholders’ equity reflects the following (in millions).

 

Elimination of Bright House’s historical shareholders’ equity and accumulated other comprehensive loss

$ (3,212

Issuance of New Charter Class A common stock to Liberty

  700   

Advisor fees and other expenses directly related to the BHN transactions

  (30
  

 

 

 
$ (2,542
  

 

 

 

Advisor fees and other expenses directly related to the BHN transactions of $30 million are not reflected in the unaudited pro forma statements of operations and consist primarily of investment banking fees and legal fees.

Note 3. TWC Transactions Pro Forma Statements of Operations Adjustments

 

(a) Adjustment to revenues and operating costs and expenses reflect the following adjustments for the three months ended March 31, 2015 and year ended December 31, 2014 (in millions).

 

     Three Months Ended
March 31, 2015
    Year Ended
December 31, 2014
 

Reclassification to conform to Charter’s financial statement classification for processing fees revenue

   $ 54      $ 201   

Elimination of advertising revenue/expense between Charter and TWC

     (14     (72
  

 

 

   

 

 

 

Adjustment to both revenues and operating costs and expenses

  40      129   

Incremental replacement stock award compensation expense

  13      94   

Elimination of amortization of actuarial gains (losses) and prior service credits for TWC’s pension plans

  (10   3   
  

 

 

   

 

 

 

Total adjustment to operating costs and expenses

$ 43    $ 226   
  

 

 

   

 

 

 

Incremental replacement stock award compensation expense represents additional expense related to converted TWC equity awards associated with the post-combination vesting period. Compensation expense, following the closing of the TWC transactions, will reflect the $614 million fair value of the awards as of the closing date and will be recognized over the remaining vesting period. At closing, TWC employee

 

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equity awards will be converted into equity awards with respect to New Charter Class A common stock, after giving effect to the Stock Award Exchange Ratio (as defined under “The Merger Agreement—Treatment of TWC Equity Awards”).

Net actuarial gains (losses) and prior service credits are included in TWC’s accumulated other comprehensive loss component of equity and reclassified into the results of operations based on service period assumptions. Because TWC’s equity, including accumulated other comprehensive loss, is eliminated in the opening balance sheet pursuant to acquisition accounting, the results for the periods following the TWC transactions will not include any impact from the amortization of these deferred net actuarial gains (losses) and prior service credits.

 

(b) Charter increased depreciation and amortization by $749 million and $3.6 billion for the three months ended March 31, 2015 and year ended December 31, 2014, respectively, as follows (in millions).

 

    Three Months Ended
March 31, 2015
    Year Ended
December 31, 2014
 
    Depreciation     Amortization     Total     Depreciation     Amortization     Total  

TWC pro forma expense based on fair value

  $ 844      $ 791      $ 1,635      $ 3,376      $ 3,559      $ 6,935   

TWC historical expense

        (886         (3,371
     

 

 

       

 

 

 

Total pro forma depreciation and amortization adjustment

$ 749    $ 3,564   
     

 

 

       

 

 

 

The increase was estimated using a preliminary average useful life of 6 years for property, plant and equipment and 9 years for customer relationships. Customer relationships are amortized using an accelerated method (sum of the years’ digits) to reflect the period over which the relationships are expected to generate cash flows. The effect of a one-year decrease in the weighted average useful lives of property, plant and equipment and customer relationships would be an increase to depreciation and amortization expense of approximately $243 million and $1.1 billion for the three months ended March 31, 2015 and year ended December 31, 2014, respectively, while the effect of a one-year increase would result in a decrease of approximately $183 million and $806 million for the three months ended March 31, 2015 and year ended December 31, 2014, respectively. The pro forma adjustments are based on current estimates and may not reflect actual depreciation and amortization once the purchase price allocation is finalized and final determination of useful lives is made.

 

(c) For the three months ended March 31, 2015 and year ended December 31, 2014, interest expense, net, increased by $211 million and $846 million, respectively, as follows (in millions).

 

     Three Months Ended
March 31, 2015
    Year Ended
December 31, 2014
 

Additional interest expense on new debt issued

   $ (284   $ (1,136

Amortization of deferred financing fees and original issue discount

     (6     (25

Amortization of net premium as a result of adjusting assumed TWC long-term debt to fair value

     74        295   

Elimination of amortization related to TWC’s previously deferred financing fees and debt discounts

     5        20   
  

 

 

   

 

 

 
$ (211 $ (846
  

 

 

   

 

 

 

Although the nature of the debt financing may be secured through various combinations of bank debt, unsecured notes and secured notes, for pro forma purposes, we have assumed issuing $21.1 billion in new first lien debt (including bank debt and senior secured notes) and $2.5 billion unsecured notes at an estimated 4.8% weighted average cost of debt. A 0.125% change in interest rates would increase (decrease) interest expense by $7 million and $27 million for the three months ended March 31, 2015 and year ended December 31, 2014, respectively.

 

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As noted in Note 1(e) above, TWC long-term debt was adjusted to fair value. The difference between the fair value and the face amount of each borrowing is amortized as an offset to interest expense over the remaining term of each borrowing based on its maturity date. This adjustment results in interest expense that effectively reflects current market interest rates rather than the stated interest rates.

 

(d) As discussed in Note 1(f) above, Charter determined that TWC’s reversing deferred tax liabilities provide a source of future taxable income in the combined entity, resulting in a reduction of substantially all of Charter’s preexisting valuation allowance. The pro forma adjustment to income taxes includes the incremental pro forma tax benefit relating to the legacy Charter operations under the assumption the Charter tax calculation no longer reflects the effects of the preexisting valuation allowance. Thus, the income tax benefit impact of the pro forma adjustments was determined by applying an estimated New Charter tax rate of 39% to the pro forma loss before taxes of New Charter following the TWC transactions, resulting in a $103 million and $470 million income tax benefit in the unaudited pro forma consolidated statements of operations for the three months ended March 31, 2015 and year ended December 31, 2014, respectively. The pro forma income tax benefit does not reflect the effects of any special partnership tax allocations as these effects are currently not estimable.

 

(e) Completion of the TWC transactions includes a conversion of all of Charter’s existing Class A common stock into 0.9042 shares of New Charter Class A common stock. This Parent Merger Exchange Ratio is applied to all legacy Charter Class A common stock and to stock issued to TWC stockholders and Liberty. This will result in the following adjustment to weighted average common shares outstanding.

 

     Three Months Ended
March 31, 2015
     Year Ended
December 31, 2014
 

Equivalent Charter shares issued to TWC stockholders

     157,353,850         157,353,850   

Equivalent Charter shares purchased by Liberty

     24,300,650         24,300,650   
  

 

 

    

 

 

 
  181,654,500      181,654,500   

Parent Merger Exchange Ratio

  0.9042      0.9042   
  

 

 

    

 

 

 

New Charter shares issued in TWC transactions

  164,251,999      164,251,999   

Reduction of legacy Charter shares outstanding upon conversion from Charter Class A common stock to New Charter Class A common stock

  10,696,608      10,382,245   
  

 

 

    

 

 

 
  153,555,391      153,869,754   
  

 

 

    

 

 

 

The amount of shares issued will vary based on the number of TWC stockholders that elect the Option B Election and therefore have the right to receive $115 in cash and shares of New Charter equivalent to 0.4562 shares of Charter. A 5% decrease in the number of shares held by stockholders electing the Option A Election, who instead elect the Option B Election, will result in a decrease in the number of shares issued of approximately 1.2 million shares.

The replacement stock awards, including restricted stock units and stock options, in New Charter were not included for purposes of the computation of pro forma diluted earnings per share because the effect would have been anti-dilutive given the pro forma net loss resulting from the TWC transactions.

 

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Note 4. BHN Transactions Pro Forma Statement of Operations Adjustments

 

(a) Adjustment to revenues and operating costs and expenses reflect the following adjustments for the three months ended March 31, 2015 and year ended December 31, 2014 (in millions).

 

     Three Months Ended
March 31, 2015
    Year Ended
December 31, 2014
 

Reclassification to conform to Charter’s financial statement classification for processing fees revenue

   $ 14      $ 55   

Elimination of TWC management fee incurred by Bright House

     (37     (143
  

 

 

   

 

 

 

Adjustment to both revenues and operating costs and expenses

  (23   (88

Adjustment to capitalize residential installation labor and other labor costs to conform to Charter’s capitalization accounting policy

  (24   (112

Elimination of pension plans and costs related to parent company obligations not assumed by Charter in the BHN transactions

  (23   (54

Reclassification to conform to Charter’s financial statement classification for other operating expense

  —        (3
  

 

 

   

 

 

 

Total adjustment to operating costs and expenses

$ (70 $ (257
  

 

 

   

 

 

 

 

(b) Charter increased depreciation and amortization by $78 million and $377 million for the three months ended March 31, 2015 and year ended December 31, 2014, respectively, as follows (in millions).

 

     Three Months Ended
March 31, 2015
    Year Ended
December 31, 2014
 
     Depreciation      Amortization      Total     Depreciation      Amortization      Total  

Bright House pro forma expense based on fair value

   $ 113       $ 76       $ 189      $ 451       $ 342       $ 793   

Bright House historical expense

           (111           (416
        

 

 

         

 

 

 

Total pro forma depreciation and amortization adjustment

$ 78    $ 377   
        

 

 

         

 

 

 

The increase was estimated using a preliminary average useful life of 6 years for property, plant and equipment and 9 years for customer relationships. Customer relationships are amortized using an accelerated method (sum of the years’ digits) to reflect the period over which the relationships are expected to generate cash flows. The effect of a one-year decrease in the weighted average useful lives of property, plant and equipment and customer relationships would be an increase to depreciation and amortization expense of approximately $30 million and $128 million for the three months ended March 31, 2015 and year ended December 31, 2014, respectively, while the effect of a one-year increase would result in a decrease of approximately $22 million and $95 million for the three months ended March 31, 2015 and year ended December 31, 2014, respectively. The pro forma adjustments are based on current estimates and may not reflect actual depreciation and amortization once the purchase price allocation is finalized and final determination of useful lives are made.

 

(c) The pro forma adjustment for the three months ended March 31, 2015 represents the elimination of transaction costs incurred by Charter in connection with the BHN transactions.

 

(d)

For the three months ended March 31, 2015 and year ended December 31, 2014, interest expense, net, increased by $2 million and decreased by $3 million, respectively, representing expected change in interest expense on new debt to be incurred to fund the BHN transactions and related amortization of deferred financing fees offset by the elimination of historical interest expense incurred by Bright House as debt is not assumed in the BHN transactions and repayment of Charter Operating’s revolving credit facility. Although the nature of the debt financing may be secured through combinations of new first lien debt (including bank

 

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  debt and senior secured notes) and unsecured notes, for pro forma purposes the $2.0 billion of debt issued for the BHN transactions was assumed to be based on current market interest rates on bank debt. A 0.125% change in interest rates would increase (decrease) interest expense by $1 million and $3 million for the three months ended March 31, 2015 and year ended December 31, 2014, respectively.

 

(e) The income tax benefit was determined by applying an estimated New Charter tax rate of 39% to pro forma loss before income taxes of New Charter following the TWC transactions and BHN transactions, less the impact on the tax rate as a result of the non-controlling interest allocation of the Charter Holdings partnership which is treated as a permanent item for tax purposes in the combined entities’ pro forma tax benefit calculation. The resulting income tax benefit of $48 million and $284 million is reflected in the unaudited consolidated statements of operations for the three months ended March 31, 2015 and year ended December 31, 2014, respectively. The resulting effective tax rate of 48% and 43% for the respective periods is a result of the permanent treatment of the noncontrolling interest expense. The pro forma income tax benefit does not reflect the effects of any special partnership tax allocations as these effects are currently not estimable.

 

(f) Reflects the following noncontrolling interest adjustment for the three months ended March 31, 2015 and year ended December 31, 2014 as follows (in millions).

 

     Three Months Ended
March 31, 2015
    Year Ended
December 31, 2014
 

Charter Holdings pro forma net loss for the TWC transactions and BHN transactions

   $ (99   $ (660

Charter Holdings 6% cash dividend to preferred unit holders

     (38     (150
  

 

 

   

 

 

 

Charter Holdings pro forma net loss available for allocation to common unit holders

  (137   (810

A/N pro forma noncontrolling interest in Charter Holdings excluding preferred units

  10   10
  

 

 

   

 

 

 

Noncontrolling interest expense—Charter Holdings common units

  (14 $ (81

Noncontrolling interest expense—Charter Holdings convertible preferred units

  38      150   
  

 

 

   

 

 

 
$ 24    $ 69   
  

 

 

   

 

 

 

The allocation of Charter Holdings’ net income to noncontrolling interest for financial reporting purposes is first allocated to the convertible preferred units for their stated dividend following their aggregate liquidation preference. The residual Charter Holdings net income (loss) is allocated to the common unit holders in Charter Holdings based on the relative economic common ownership interests in Charter Holdings. A/N’s relative economic common ownership interest in Charter Holdings used for pro forma purposes is 10%.

 

(g) Completion of the TWC transactions includes a conversion of all of Charter’s existing Class A common stock into 0.9042 shares of New Charter Class A common stock. This Parent Merger Exchange Ratio is applied to all legacy Charter Class A common stock and to stock issued to Liberty and A/N. This will result in the following adjustment to weighted average common shares outstanding for both the three months ended March 31, 2015 and year ended December 31, 2014.

 

Equivalent Charter shares purchased by Liberty

  4,046,329   

Parent Merger Exchange Ratio

  0.9042   
  

 

 

 

New Charter shares issued to Liberty

  3,658,691   
  

 

 

 

The Charter Holdings common units of 34.3 million (30.9 million units applying the Parent Merger Exchange Ratio of 0.9042) and Charter Holdings convertible preferred units of 10.3 million (9.3 million units applying the Parent Merger Exchange Ratio of 0.9042) to be issued to A/N were not included on an if-converted, if-exchanged basis for purposes of the computation of pro forma diluted earnings per share because the effect would have been anti-dilutive given the pro forma net loss resulting from the TWC transactions and BHN transactions.

 

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RISK FACTORS

In addition to the other information contained or incorporated by reference into this joint proxy statement/prospectus, including the matters addressed in “Cautionary Statement Regarding Forward-Looking Statements,” beginning on page [] of this joint proxy statement/prospectus, you should carefully consider the following risk factors in determining whether to vote for the approval of the adoption of the merger agreement at the TWC special meeting and the Charter special meeting and the approval of the other proposals being presented at the Charter special meeting. You should also read and consider the risk factors associated with each of the businesses of TWC and Charter because these risk factors may affect the operations and financial results of the combined company. These risk factors may be found under (i) Part I, Item 1A, “Risk Factors” in the Charter 2014 Form 10-K, (ii) Part II, Item 1A, “Risk Factors” in the Charter Form 10-Q for the first quarter of 2015 and (iii) Part I, Item 1A “Risk Factors” in the TWC 2014 Form 10-K, each of which is on file with the SEC and all of which are incorporated by reference into this joint proxy statement/prospectus.

If any of the following risks and uncertainties develop into actual events, these events could have a material adverse effect on the business, financial condition or results of operations of, (i) prior to the mergers and/or the BHN transactions, Charter, TWC and/or BHN, as applicable, and (ii) after the mergers and/or the BHN transactions, the combined company. In addition, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.

Risks Related to the Mergers and the BHN Transactions

In the event (i) only the mergers or the mergers and the BHN transactions are completed, former Charter stockholders (excluding Liberty Broadband) and former TWC stockholders (excluding Liberty Broadband) will have significantly lower ownership and voting interest in New Charter following the completion of such transactions than they currently have in Charter and TWC, respectively, and will exercise less influence over management, or (ii) only the BHN transactions are completed, existing Charter stockholders (excluding Liberty Broadband) will have a reduced ownership and voting interest in Charter following the completion of the BHN transactions than they currently have in Charter and will exercise less influence over management.

Based on the number of shares of TWC common stock outstanding as of June 10, 2015, and the number of shares of Charter Class A common stock outstanding as of June 10, 2015, it is expected that, immediately after completion of the mergers, the issuance of shares to Liberty Broadband and the completion of the BHN transactions, and depending on the outcome of the election feature contained in the merger agreement, former Charter stockholders (excluding Liberty Broadband) are expected to own between approximately 26% and 24% of New Charter Class A common stock, former TWC stockholders (excluding Liberty Broadband) are expected to own between approximately 41% and 45% of New Charter Class A common stock, A/N is expected to own indirectly (on an as-converted, as-exchanged basis) between approximately 14% and 13% of New Charter Class A common stock and Liberty Broadband is expected to own between approximately 19% and 18% of New Charter Class A common stock. If only the mergers are completed, it is expected that former Charter stockholders (excluding Liberty Broadband) will own between approximately 31% and 28% of New Charter Class A common stock, former TWC stockholders (excluding Liberty Broadband) will own between approximately 48% and 53% of New Charter Class A common stock and Liberty Broadband will own between approximately 21% and 19% of New Charter Class A common stock. In connection with the mergers, each TWC stockholder and Charter stockholder will become a stockholder of New Charter with a percentage ownership of New Charter that is significantly smaller than the stockholder’s percentage ownership in TWC and Charter, respectively. Charter stockholders and TWC stockholders currently have the right to vote for their respective boards of directors and on other matters affecting the applicable company. Consequently, former Charter stockholders (excluding Liberty Broadband) and former TWC stockholders will be able to exercise less influence over the management, operations and policies of New Charter after the mergers (and the BHN transactions, if applicable) than they currently exercise over the management, operations and policies of Charter and TWC, respectively.

 

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If only the BHN transactions are completed, it is expected that following the BHN transactions existing Charter stockholders (excluding Liberty Broadband) will own approximately 52% of Charter Class A common stock, Liberty Broadband will own approximately 20% of Charter Class A common stock and A/N will indirectly own (on an as-converted, as exchanged basis) approximately 28% of Charter Class A common stock. Charter stockholders currently have the right to vote for their board of directors and on other matters affecting Charter. Consequently, assuming the mergers are not completed but the BHN transactions are completed, existing Charter stockholders (excluding Liberty Broadband) will be able to exercise less influence over the management, operations and policies of Charter after the BHN transactions than they currently exercise over the management, operations and policies of Charter.

In order to complete the mergers and/or the BHN transactions, Charter along with TWC and Bright House must make certain governmental filings and obtain certain governmental authorizations, and if such filings and authorizations are not made or granted or are granted with conditions to the parties, completion of the mergers and/or the BHN transactions may be jeopardized or the anticipated benefits of the mergers and/or the BHN transactions could be reduced.

The completion of the mergers and/or the BHN transactions are each conditioned upon, among other things, the expiration or early termination of the applicable waiting periods under the HSR Act and the required governmental authorizations, including an order of the FCC with respect to the mergers and/or the BHN transactions, having been obtained and being in full force and effect. Although Charter and TWC have agreed in the merger agreement, and Charter and BHN have agreed in the BHN contribution agreement, to use reasonable best efforts, subject to certain limitations, to make certain governmental filings or obtain the required governmental authorizations, as the case may be, there can be no assurance that the relevant waiting periods will expire or that the relevant authorizations will be obtained. In addition, the governmental authorities with or from which these authorizations are required generally have broad discretion in administering the governing regulations. As a condition to authorization of the mergers and/or the BHN transactions, these governmental authorities may impose requirements, limitations or costs or require divestitures or place restrictions on the conduct of the combined company’s business after completion of the mergers and/or the BHN transactions.

Under the terms of each of the merger agreement and BHN contribution agreement, subject to certain exceptions, Charter and its subsidiaries are required to accept certain conditions and take certain actions imposed by governmental authorities and accept any other remedies to the extent such actions, conditions or other remedies would not constitute a burdensome condition (see “The Merger Agreement—Reasonable Best Efforts Covenant” for a definition of burdensome condition with respect to the TWC transactions) or a BHN contribution burdensome condition (see “The BHN Contribution Agreement—Reasonable Best Efforts Covenant” for a definition of BHN contribution burdensome condition with respect to the BHN transactions). There can be no assurance that regulators will not impose conditions, terms, obligations or restrictions and that such conditions, terms, obligations or restrictions will not have the effect of delaying completion of the mergers and/or the BHN transactions or imposing additional material costs on or materially limiting the revenues of New Charter (or, if only the BHN transactions are completed, Charter) following the mergers and/or the BHN transactions, or otherwise adversely affecting the business and results of operations of New Charter or Charter, as applicable, after completion of the mergers and/or the BHN transactions. In addition, there can be no assurance that these conditions, terms, obligations or restrictions will not result in the delay or abandonment of the mergers and/or the BHN transactions.

For a more complete summary of the conditions that must be satisfied or waived prior to completion of the mergers and/or the BNH transactions, see the section entitled “The Merger Agreement—Conditions to Completion of the Merger” and “The BHN Contribution Agreement—Conditions to the Completion of the Contribution,” respectively, beginning on page [●] and page [●], respectively, of this joint proxy statement/prospectus.

 

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New Charter (or, if only the BHN transactions are completed, Charter) may not realize anticipated cost synergies and growth opportunities.

New Charter (or, if only the BHN transactions are completed, Charter) expects to realize cost synergies, growth opportunities and other financial and operating benefits as a result of the mergers and/or the BHN transactions. The combined company’s success in realizing these cost synergies, growth opportunities and other financial and operating benefits, and the timing of this realization, depends on the successful integration of the business operations obtained in the mergers and the BHN transactions. Even if New Charter or Charter, as applicable, is able to integrate the business operations obtained in the mergers and/or the BHN transactions successfully, it is not possible to predict with certainty if or when these cost synergies, growth opportunities and benefits will occur, or the extent to which they actually will be achieved. For example, the benefits from the mergers and/or the BHN transactions may be offset by costs incurred in integrating the new business operations or in obtaining or attempting to obtain regulatory approvals for the mergers and/or the BHN transactions, or increased operating costs that may be experienced as a result of the mergers and/or the BHN transactions. Realization of any benefits and cost synergies could be affected by the factors described in other risk factors and a number of factors beyond New Charter’s or Charter’s control, as applicable, including, without limitation, general economic conditions, increased operating costs, the response of competitors and vendors and regulatory developments.

If New Charter (or, if only the BHN transactions are completed, Charter) is not able to successfully integrate Charter’s business with that of TWC and/or BHN within the anticipated time frame, or at all, the anticipated cost savings and other benefits of the mergers and/or BHN transactions may not be realized fully, or at all, or may take longer to realize than expected. In such circumstances, in the event the mergers (and, if applicable, the BHN transactions) are completed, New Charter may not perform as expected and the value of the New Charter Class A common stock (including the merger consideration) may be adversely affected.

Charter, TWC and BHN have operated and, until completion of the mergers and/or BHN transactions will continue to operate, independently, and there can be no assurances that their businesses can be integrated successfully. After consummation of the mergers and/or the BHN transactions the combined company will have significantly more systems, assets, investments, businesses, customers and employees than each company did prior to the mergers and/or the BHN transactions. It is possible that the integration process could result in the loss of key Charter, TWC and/or BHN employees, the loss of subscribers and customers, the disruption of the companies’ ongoing businesses or in unexpected integration issues, higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated. The process of integrating TWC, BHN, or TWC and BHN, with the businesses Charter operated prior to the mergers and/or the BHN transactions will require significant capital expenditures and the expansion of certain operations and operating and financial systems. Management of each company will be required to devote a significant amount of time and attention to the integration process before the mergers and/or the BHN transactions are completed. There is a significant degree of difficulty and management involvement inherent in that process. These difficulties include:

 

    integrating the companies’ operations and corporate functions;

 

    integrating the companies’ technologies, networks and customer service platforms;

 

    integrating and unifying the product offerings and services available to customers;

 

    harmonizing the companies’ operating practices, employee development and compensation programs, internal controls and other policies, procedures and processes;

 

    maintaining existing relationships and agreements with customers, providers, programmers and other vendors and avoiding delays in entering into new agreements with prospective customers, providers and vendors;

 

    addressing possible differences in business backgrounds, corporate cultures and management philosophies;

 

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    consolidating the companies’ administrative and information technology infrastructure;

 

    coordinating programming and marketing efforts;

 

    coordinating geographically dispersed organizations;

 

    integrating information, purchasing, provisioning, accounting, finance, sales, billing, payroll, reporting and regulatory compliance systems;

 

    integrating and unifying the product offerings and services available to customers, including customer premise equipment and video user interfaces;

 

    completing the conversion of analog systems to all-digital for the systems to be acquired from TWC and BHN;

 

    managing a significantly larger company than before the completion of the mergers and/or the BHN transactions; and

 

    attracting and retaining the necessary personnel associated with the acquired assets.

Even if the new businesses are successfully integrated, it may not be possible to realize the benefits that are expected to result from the mergers and/or the BHN transactions, or realize these benefits within the time frame that is expected. For example, the elimination of duplicative costs may not be possible or may take longer than anticipated, or the benefits from the mergers and/or BHN transactions may be offset by costs incurred or delays in integrating the businesses and increased operating costs. If the combined company fails to realize the anticipated benefits from the transactions, its liquidity, results of operations, financial condition and/or share price may be adversely affected. In addition, at times, the attention of certain members of Charter’s, TWC’s and/or BHN’s management and resources may be focused on the completion of the mergers and/or the BHN transactions and the integration of the businesses and diverted from day-to-day business operations, which may disrupt each company’s business and the business of the combined company.

The substantial indebtedness that will be incurred by New Charter in connection with the mergers (and, if applicable, the BHN transactions) could adversely affect New Charter’s operations and financial condition after the mergers and the BHN transactions.

As of March 31, 2015, Charter had approximately $14.0 billion of long-term debt outstanding, excluding the current portion of long-term debt related to CCOH Safari, LLC and CCO Safari, LLC, which debt was repaid in April 2015. Giving effect to the mergers, the BHN transactions, the Liberty transactions and the related financings, New Charter will have a total of approximately $64.1 billion of long-term debt outstanding (if all TWC stockholders elect the Option A Election) or approximately $68.3 billion of long-term debt outstanding (if all TWC stockholders elect the Option B Election). As of March 31, 2015, after giving effect to the mergers, the BHN transactions and the related financings, New Charter will have availability under its credit facilities of approximately $1.4 billion.

New Charter’s and its subsidiaries’ indebtedness could have negative consequences to New Charter after the mergers (and, if completed, the BHN transactions), such as:

 

    requiring New Charter to dedicate a substantial portion of its cash flow from operating activities to payments on its indebtedness, thereby reducing the availability of cash flow to fund working capital, capital expenditures, research and development efforts, potential strategic acquisitions and other general corporate purposes;

 

    limiting New Charter’s ability to obtain additional financing to fund growth, working capital or capital expenditures, or to fulfill debt service requirements or other cash requirements;

 

    exposing New Charter to increased interest expense to the extent New Charter refinances existing debt with higher cost debt;

 

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    to the extent that New Charter’s debt is subject to floating interest rates, increasing New Charter’s vulnerability to fluctuations in market interest rates;

 

    placing New Charter at a competitive disadvantage relative to competitors that have less debt;

 

    adversely affecting New Charter’s relationship with customers and suppliers;

 

    limiting New Charter’s flexibility to pursue other strategic opportunities or in planning for, or reacting to, changes in its business, the cable and telecommunications industries, and the economy at large; and

 

    limiting New Charter’s ability to buy back New Charter Class A common stock or pay cash dividends.

If current debt amounts increase, the related risks that Charter now faces may intensify.

Because of high debt levels, New Charter may not be able to service its debt obligations in accordance with their terms after the mergers (and, if completed, the BHN transactions).

New Charter’s ability to meet its expense and debt service obligations contained in the agreements governing New Charter’s indebtedness will depend on its future performance, which will be affected by financial, business, economic and other factors, including potential changes in customer preferences, the success of product and marketing innovation and pressure from competitors. Should New Charter’s revenues decline after the mergers (and, if completed, the BHN transactions), it may not be able to generate sufficient cash flow to pay its debt service obligations when due. If New Charter is unable to meet its debt service obligations after the mergers (and, if completed, the BHN transactions) or should it fail to comply with its financial and other restrictive covenants contained in the agreements governing New Charter’s indebtedness, New Charter may be required to refinance all or part of its debt, sell important strategic assets at unfavorable prices or borrow more money. New Charter may not be able to, at any given time, refinance its debt, sell assets or borrow more money on terms acceptable to New Charter or at all. The inability of New Charter to refinance its debt could have a material adverse effect on New Charter’s financial condition and results from operations after the mergers (and, if completed, the BHN transactions).

The existing agreements and instruments governing Charter’s existing debt contain restrictions and limitations that could significantly affect its ability to operate its business, as well as significantly affect its liquidity and, after the mergers (and, if completed, the BHN transactions), New Charter will be subject to restrictive debt covenants, which may restrict its operational flexibility.

Charter’s existing credit facilities and the indentures governing its debt contain a number of significant covenants that could adversely affect its ability to operate its business, its liquidity, and its results of operations. These covenants restrict, among other things, Charter’s and its subsidiaries’ ability to:

 

    incur additional debt;

 

    repurchase or redeem equity interests and debt;

 

    issue equity;

 

    make certain investments or acquisitions;

 

    pay dividends or make other distributions;

 

    dispose of assets or merge;

 

    enter into related party transactions; and

 

    grant liens and pledge assets.

After the mergers (and, if completed, the BHN transactions), the agreements governing New Charter’s indebtedness will contain additional financial and other restrictive covenants that may be similarly or more restrictive and will limit New Charter’s and its subsidiaries’ ability to engage in activities that may be in their

 

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long-term best interests, including minimum interest coverage and maximum leverage ratios and covenants that may limit the ability of New Charter and its subsidiaries to incur additional indebtedness, create liens, merge or consolidate with another company, sell assets and enter into transactions with affiliates. A breach of any of these covenants or New Charter’s inability to maintain the required financial ratios could result in a default under the related indebtedness. If a default occurs, the relevant lenders could elect to declare New Charter’s indebtedness, together with accrued interest and other fees, to be immediately due and payable. These factors could have a material adverse effect on New Charter’s business, financial condition, results of operations, cash flows, and/or share price.

New Charter will be dependent on its cash on hand, cash flow from operations and access to additional liquidity resources to fund its debt obligations, capital expenditures and ongoing operations.

New Charter’s ability to service its existing debt and debt incurred in connection with the mergers (and, if completed, the BHN transactions), and to fund its planned capital expenditures and ongoing operations will depend on its ability to continue to generate cash flow and its access to additional liquidity sources. New Charter’s ability to continue to generate cash flow will be dependent on many factors, including, among other things:

 

    New Charter’s ability to sustain and grow revenues and cash flow from operations by offering video, Internet, voice, advertising and other services to residential and commercial customers, to adequately meet the customer experience demands in its markets and to maintain and grow its customer base, particularly in the face of increasingly aggressive competition, the need for innovation and the related capital expenditures and the economic conditions in the United States;

 

    the impact of competition from other market participants, including but not limited to incumbent cable and telephone companies, direct broadcast satellite operators, wireless broadband and telephone providers, DSL and cable providers and video provided over the Internet;

 

    general business conditions, economic uncertainty or downturn, high unemployment levels and the level of activity in the housing sector;

 

    New Charter’s ability to obtain programming at reasonable prices or to raise prices to offset, in whole or in part, the effects of higher programming costs (including retransmission consents);

 

    the development and deployment of new products and technologies; and

 

    the effects of governmental regulation on New Charter’s business.

Some of these factors will be beyond New Charter’s control. If New Charter is unable to generate sufficient cash flow or New Charter is unable to access additional liquidity sources, New Charter may not be able to service and repay its debt, operate its business, respond to competitive challenges, or fund its other liquidity and capital needs.

New Charter will be dependent on an equity financing from Liberty Broadband to partially finance the mergers.

Charter plans to use the proceeds of $4.3 billion from the purchase by Liberty Broadband of New Charter Class A common stock to partially fund the mergers. Liberty Broadband will primarily rely on proceeds from third-party investors to fund the investment in New Charter Class A common stock. Charter cannot guarantee that Liberty Broadband will successfully complete these transactions with such third-party investors. The mergers are not conditioned on the receipt of financing, including financing from Liberty Broadband.

For tax purposes, New Charter (or, if only the BHN transactions are completed, Charter) could experience a deemed ownership change in the future that could limit its ability to use its tax loss carryforwards.

In the past, Charter has experienced “ownership changes” as defined in Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). In general, an “ownership change” occurs whenever the percentage of

 

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the stock of a corporation owned, directly or indirectly, by “5-percent stockholders” (within the meaning of Section 382 of the Code) increases by more than 50 percentage points over the lowest percentage of the stock of such corporation owned, directly or indirectly, by such “5-percent stockholders” at any time over the preceding three years. As a result, Charter is, and following the TWC transactions New Charter (or, if only the BHN transactions are completed, Charter) will be, subject to an annual limitation on the use of its loss carryforwards which existed at November 30, 2009 for the first “ownership change” and those that existed at May 1, 2013 for the second “ownership change.” This limitation on the ability to use loss carryforwards, in conjunction with the loss carryforward expiration provisions, could reduce New Charter’s or Charter’s (as applicable) ability to use a portion of its loss carryforwards to offset future taxable income, which could result in New Charter or Charter (as applicable) being required to make material cash tax payments. New Charter’s or Charter’s (as applicable) ability to make such income tax payments, if any, will depend at such time on its liquidity or its ability to raise additional capital, and/or on receipt of payments or distributions from Charter Holdings and its subsidiaries.

If Charter or New Charter (as applicable) were to experience a third ownership change as a result of the TWC transactions and/or Liberty transactions contemplated herein or in the future (as a result of purchases and sales of stock by its “5-percent stockholders,” new issuances or redemptions of its stock, certain acquisitions of its stock and issuances, redemptions, sales or other dispositions or acquisitions of interests in its “5-percent stockholders”), New Charter’s or Charter’s (as applicable) ability to use its loss carryforwards could become subject to further limitations. Charter’s common stock is, and New Charter’s (or, if only the BHN transactions are completed, Charter’s) common stock will be, subject to certain transfer restrictions contained in its amended and restated certificate of incorporation. These restrictions, which are designed to minimize the likelihood of an ownership change occurring and thereby preserve the ability to utilize loss carryforwards, are not currently operative but could become operative in the future if certain events occur and the restrictions are imposed by New Charter’s or Charter’s board of directors. However, there can be no assurance that New Charter’s or Charter’s board of directors would choose to impose these restrictions or that such restrictions, if imposed, would prevent an ownership change from occurring.

Charter, TWC and Bright House may have difficulty attracting, motivating and retaining executives and other employees in light of the mergers and the BHN transactions.

Uncertainty about the effect of the mergers and/or the BHN transactions on Charter, TWC and Bright House employees may impair Charter’s, TWC’s and Bright House’s ability to attract, retain and motivate personnel prior to and following the mergers and/or the BHN transactions. Employee retention may be particularly challenging during the pendency of the mergers and/or the BHN transactions, as employees may experience uncertainty about their future roles with the combined business. In addition, certain employees potentially could terminate their employment for good reason and collect severance if certain specified circumstances set forth in their employment agreements occur following the mergers and/or the BHN transactions, including certain changes in such employees’ duties, position, compensation and benefits or primary office location. See “Interests of TWC’s Directors and Executive Officers in the Transactions” and “Interests of Charter’s Directors and Executive Officers in the Transactions” for a further discussion of some of these issues. If employees of Charter, TWC or Bright House depart, the integration of the companies may be more difficult and the combined company’s business following the mergers and/or the BHN transactions may be harmed. Furthermore, New Charter (or, if only the BHN transactions are completed, Charter) may have to incur significant costs in identifying, hiring and retaining replacements for departing employees and may lose significant expertise and talent relating to the businesses of Charter, TWC and/or Bright House, and the combined company’s ability to realize the anticipated benefits of the mergers and/or the BHN transactions may be adversely affected. In addition, there could be disruptions to or distractions for the workforce and management associated with activities of labor unions or integrating employees into New Charter.

 

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A delay in the completion of the mergers and/or the BHN transactions may diminish the anticipated benefits of the mergers and/or the BHN transactions.

Completion of the mergers and/or the BHN transactions is conditioned upon the receipt of certain governmental consents and approvals, orders, authorizations, and rulings, including the expiration or termination of any applicable waiting period (or extension thereof) under the HSR Act and the adoption of an order, by the FCC and any other requisite governmental entity granting its consent to the mergers and/or the BHN transactions. The requirement to receive these consents and approvals, orders, authorizations and rulings before the mergers could delay the completion of the mergers and/or the BHN transactions if, for example, government agencies request additional information from the parties in order to facilitate their review of the mergers and/or the BHN transactions or require any conditions precedent to granting their approval of the mergers and/or the BHN transactions. In addition, these governmental agencies may attempt to condition their approval of the mergers and/or the BHN transactions on the imposition of conditions that could have a material adverse effect on New Charter (or, if only the BHN transactions are completed, Charter) after the mergers and/or the BHN transactions, including but not limited to its operating results or the value of New Charter Class A common stock (or, if only the BHN transactions are completed, Charter Class A common stock). Any delay in the completion of the mergers and/or the BHN transactions could diminish the anticipated benefits of the mergers and/or the BHN transactions or result in additional transaction costs, including interest expense for debt incurred in anticipation of the mergers and/or the BHN transactions, loss of revenue or other effects associated with uncertainty about the mergers and/or the BHN transactions. Any uncertainty over the ability of the companies to complete the mergers and/or the BHN transactions could make it more difficult for Charter, TWC and Bright House to retain key employees or to pursue business strategies.

Prior to the mergers and/or the BHN transactions, Charter, TWC and/or BHN, as applicable, and after the mergers and/or the BHN transactions, the combined company, will incur significant transaction-related costs in connection with the mergers and/or the BHN transactions.

Prior to the mergers and/or the BHN transactions, Charter, TWC and/or BHN, as applicable, and after the mergers and/or the BHN transactions, the combined company, expect to incur a number of non-recurring costs associated with the mergers and/or the BHN transactions before, at, and after closing the mergers and/or the BHN transactions. If the merger agreement is terminated under certain circumstances, Charter will be required to pay to TWC certain termination fees (see “The Merger Agreement—Termination Fees—Termination Fees Payable by Charter”). If the merger agreement is terminated under certain circumstances, TWC will be required to pay to Charter certain termination fees (see “The Merger Agreement—Termination Fees—Termination Fees Payable by TWC”). If the BHN contribution agreement is terminated under certain circumstances, Charter will be required to pay to Bright House certain termination fees (see “The BHN Contribution Agreement—Liquidation Damages”). Charter and/or New Charter also will incur transaction fees and costs related to financing (including interest and fees with any pre-funding of the consideration to be paid in the mergers and/or the BHN transactions) and formulating and implementing integration plans, including facilities and systems implementation costs and employment-related costs. Some of these costs have already been incurred or may be incurred regardless of whether the mergers and/or the BHN transactions are completed, including a portion of the fees and expenses of financial advisors and other advisors and representatives and filing fees for this joint proxy statement/prospectus. While many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time, management of Charter continues to assess the magnitude of these costs, and additional unanticipated costs may be incurred in connection with the mergers and integration. There are a number of factors beyond the control of the parties that could affect the total amount or the timing of all of the expected integration expenses. Although the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, should offset integration-related costs over time, this net benefit may not be achieved in the near term, or at all. These integration expenses may result in Charter and/or New Charter taking significant charges against earnings following the completion of the mergers and/or the BHN transactions. In addition, if the mergers and/or the BHN transactions are not consummated, Charter will bear some or all of these costs without the benefit of efficiencies from the integration of