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Liberty to Buy 27% Stake in Charter Communications

Liberty Media said Tuesday that it will buy a 27.3% stake in the cable TV provider Charter Communications for about $2.62 billion.

The Englewood, Colo.-based holding company controlled by billionaire John Malone said it agreed on a deal with investment funds tied to Apollo Management, Oaktree Capital Management and Crestview Partners to buy about 26.9 million shares and about 1.1 million warrants in Charter.

Liberty Media Corp. paid $95.50 per share, which represents an about 3% discount to Charter’s Monday closing stock price. The deal is expected to close in the first half of the second quarter of 2013.

Charter provides cable, internet and phone service to more than 5 million customers in 25 states. Liberty said it plans to fund the purchase with a combination of cash on hand and new loans.

As part of the deal, Liberty will get to nominate four people to the company’s board. It expects its nominees to include Malone, Liberty President and CEO Gregory Maffei, Liberty Global Inc. executive Nair Balan and Barnes & Noble Inc. CFO Michael Huseby.

Four current members of Charter’s board will resign.

The 72-year-old Malone is a billionaire who made his fortune by becoming chief executive of Denver-based Tele-Communications Inc. in 1973. After rescuing the cable TV company from near bankruptcy, he sold it to AT&T for $48 billion in 1998.

The investment follows a handful of recent changes to Liberty’s investment portfolio. In January, the company spun off its Starz premium pay TV channel subsidiary and boosted its stake in satellite radio company Sirius XM Radio Inc. to above 50%. It also increased its stake in concert promoter Live Nation Entertainment Inc. to 27%.

Also as part of Tuesday’s agreement, Liberty said it wouldn’t increase its stake in Charter above 35% until January 2016 and 39.99% after that. Liberty also agreed to not fight for additional spots on Charter’s board through the 2015 shareholder meeting and to continue to refrain from doing that as long as its picks are nominated to Charter’s board or until the deal is terminated.

In morning trading, Charter Communications Corp. shares added 98 cents to $99.02, while Liberty Media Class A shares rose 98 cents to $111.64.

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