Comcast Corp. has agreed to acquire Time Warner Cable Inc. for $158.82 a share in an all-stock deal, combining the nation's top two cable TV companies. It will make Comcast, which also owns NBCUniversal, a dominant force in both creating and delivering entertainment to U.S. homes.
Comcast Buying TWC For $45 Billion
LOS ANGELES — Comcast Corp. has confirmed that it agreed to buy Time Warner Cable Inc. for about $45.2 billion in stock, or $158.82 per share, in a deal that would combine the nation’s top two cable TV companies.
The deal will make Comcast, which also owns NBCUniversal, a dominant force in both creating and delivering entertainment to U.S. homes.
The deal was approved by the boards of both companies and, pending regulatory approval, is expected to close by the end of the year.
The price is about 17 percent above Time Warner Cable shares’ Wednesday closing price of $135.31 and trumps a proposal by Charter Communications Inc. to buy Time Warner for about $132.50 per share, or $38 billion in cash and stock.
Time Warner Cable shareholders will receive 2.875 Comcast shares for every Time Warner Cable share they own. Once the deal is final, they will end up owning about 23 percent of the combined company.
Charter had pursued Time Warner Cable for months, but Time Warner Cable CEO Rob Marcus had consistently rejected what he called a lowball offer, saying he’d cut a deal for $160 per share in cash and stock.
BRAND CONNECTIONS
For a time, Comcast stayed in the background, waiting to purchase any chunk of subscribers that a combined Charter-Time Warner Cable would sell off. Charter had planned to finance its bid with $25 billion in new debt. As part of a plan to pay off the debt quickly, the company considered selling off some of its territories after a deal had closed. Time Warner Cable’s Marcus had also balked at the huge debt burden the Charter takeover represented.
Instead, Comcast now plans to divest 3 million pay TV subscribers after the deal closes. With 22 million of its own pay TV customers and Time Warner Cable’s 11.2 million, the combined entity will end up with about 30 million subscribers when the deal is complete, a level believed not to trigger the concern of antitrust authorities. A formal cap was dissolved years ago by regulators, but divesting subscribers could help the deal get approved more quickly.
Comcast is taking the position that because Comcast and Time Warner Cable don’t serve overlapping markets, their combination won’t reduce competition for consumers. Comcast operates mainly in the northeast including its home base of Philadelphia and places such as Boston, Washington and Chicago. Time Warner Cable has strongholds around its headquarters in New York as well as Los Angeles, Dallas and Milwaukee.
In many of those areas, the combined Comcast/Time Warner Cable will face competition from rivals AT&T and Verizon, which provide both pay TV services and Internet hookups. Both AT&T and Verizon are growing quickly. They ended 2013 with 5.5 million and 5.3 million pay TV subscribers, respectively.
Comcast and Time Warner Cable are expected to save $1.5 billion in annual costs over three years, with half of that realized in the first year.
Comcast also plans to add an additional $10 billion in share buybacks at the close of the deal, on top of a recent plan to boost its share buyback authority to $7.5 billion from $1 billion.
Conceding that it had lost the takeover battle, Charter issued a statement Wednesday saying, “Charter has always maintained that our greatest opportunity to create value for shareholders is by executing our current business plan, and that we will continue to be disciplined in this and any other (merger and acquisition) activity we pursue.”
Even before the deal had been formally announced, it was being denounced. Public Knowledge, a Washington-based consumer rights group, said in a statement Wednesday that regulators must stop the deal, because it would give Comcast “unprecedented gatekeeper power in several important markets.”
“An enlarged Comcast would be the bully in the schoolyard,” it said.
Comments (11)
Andrea Rader says:
February 12, 2014 at 11:45 pm
Prediction: This will sail through the cable-friendly Wheeler FCC with relatively few restrictions. Anything to increase cable’s leverage with those big, mean broadcasters who are resisting the relentless push to give up spectrum to Big Wireless.
Albert Pica says:
February 13, 2014 at 8:40 am
I 100% agree.
Ellen Samrock says:
February 13, 2014 at 11:31 am
Exactly right. When Comcast bought NBCU it agreed to a whole host of conditions including net neutrality. Since then the courts have struck down the FCC’s net neutrality regulations. But if Comcast agrees to extend these conditions to TWC more then likely the FCC will approve the merger–if nothing more then to gain a back door approach at enforcing net neutrality. I find it curious that when these two companies went through a very public courting phase, not a word of caution was heard from Chairman Wheeler. With Wheeler on their side, I’m sure these cable giants feel confident that the merger will go through.
Clayton Mowry says:
February 13, 2014 at 9:53 am
Wheeler is hand-in-glove with Big Cable. They continue to raise prices on every product with the current forecast that by 2020 average cable bill will be close to $200.00. However, he must protect the consumers out there from those evil JSA’s/SSA’s in small markets that threaten media diversity (he and his spectrum greedy buddies in telecom probably would be happy if stations start going dark )and want a few more cents per month to keep their stations profitable and newscasts viable. He is vying to be more prejudiced against broadcasting than Genachowski ever was. This may be the worst 8 years of anti-broadcaster FCC in history
Angie McClimon says:
February 13, 2014 at 10:29 am
This is bad news for consumers. It may sail through the FCC but if the DOJ has any brains, they should already know to reject it.
Jay Miller says:
February 13, 2014 at 11:14 am
The Obama DOJ and Brains???You know better to connect those 2 ..This is a Monopoly..pure and simple!!!
Angie McClimon says:
February 13, 2014 at 1:14 pm
The DOJ (regardless of who is president, but I can see your bias showing) has anti-trust regulations to work with. They need to see the nationwide scope of this, not just want dreck the companies feed it.
Gene Johnson says:
February 13, 2014 at 11:15 am
DOJ can’t per se reject it. It would have to sue to stop the deal. However, objections from DOJ usually put an end to such transactions as the parties don’t want to litigate the matter. That’s what happened with the AT&T/T-Mobile proposed merger/take-over. Whether a similar fate awaits the Comcast/TW deal remains to be seen as the cable industry is not as highly concentrated as is the mobile communications industry, and as noted in the article Comcast and TW don’t compete against each other for consumers/subscribers. But, there may be impacts on other markets (e.g., program suppliers/distributors) that could lead regulators to try to block the transaction.
kendra campbell says:
February 13, 2014 at 11:41 am
Comcast and TWC are going to be stunned by the huge backlash to this proposed deal. DOA!
Ellen Samrock says:
February 13, 2014 at 12:13 pm
Public Knowledge just issued a PR condemning the merger. We’ll see if Gigi Sohn has the ear of Tom Tom the Cable Guy on this one.
Brian Bussey says:
February 13, 2014 at 1:38 pm
1.5 billion in immediate savings ? lets see how American workers do you have to layoff
To generate 1.5 billion is savings ? They have already said their wires don’t overlap so the only thing left is American workers. So 1.5 billion dollars divided by 50,000. Equals 30,000 jobs gone forever. SO let us speak of this merger in real terms. The ONLY benefit is more bonus money in the executive compensation pool and the permanent loss of 30,000 American jobs. ? Where exactly is the benefit? There is no benefit. Comcast was too big before this attempted merger.