The two-year quest by Charter Communications to capture Time Warner Cable may finally be realized.
Charter Communications Inc. is closing in on a friendly $55.1 billion deal to acquire Time Warner Cable Inc. (NYSE: TWC), according to multiple press reports this afternoon. The reports say the deal, which would value TWC stock at $195 per share, could be sealed and announced as early as Tuesday.
In the first news report of the deal today, Bloomberg reported that the agreement will call for Charter to pay $100 per share in cash and the rest in Charter stock, meaning that slightly more half of the purchase price would be paid in cash. That price is 14% higher than Time Warner Cable's closing stock price last Friday. It's also a very healthy markup from the $158 per share that Comcast Corp. (Nasdaq: CMCSA, CMCSK) agreed to pay last year in its $45.2 billion deal for TWC that collapsed last month. And it represents an even bigger markup from the $132 per share that Charter offered in its hostile takeover bid that was foiled by Comcast's white knight offer last year.
Bloomberg also reported that Liberty Broadband, the investment vehicle of cable kingpin John Malone, will pump in funds to help seal the deal by buying $5 billion of new Charter stock at its current price. As reported by the Wall Street Journal, Malone also helped make the deal happen by calling Time Warner Cable Chairman & CEO Rob Marcus early in the courting process and indicating that he wished to pursue a friendly bid this time around.
In addition, Bloomberg reported that Charter has agreed to pay a $2 billion breakup fee if the deal doesn't happen. Comcast avoided having to pay any breakup fee when its agreement to buy TWC cratered.
If the reports are true and Charter can close the deal, it would transform Charter from the fourth-biggest US cable operator to the nation's second-biggest MSO, with about 15 million video subscribers and more than 17 million broadband subscribers. Only Comcast would have more of either.
Plus, Charter would gain another 2 million video and broadband customers if it can conclude its deal to buy Bright House Networks , which is now in the works. That would give the new Charter about 17 million video subs and close to 20 million broadband customers, making it almost the size of Comcast. (See Charter, Bright House: The Wedding's Back On.)
Among the other benefits that Charter would reap are the major markets that it would pick up from TWC and Bright House. Charter, which now boasts St. Louis as its biggest metro market, would pick up such prime metros as New York, Los Angeles, Dallas, Columbus, Cincinnati and Charlotte from TWC and Orlando and Tampa from Bright House.
But any Charter-TWC deal must still clear a couple of big potential roadblocks. For one thing, Altice , the French communications giant that just agreed to buy Suddenlink Communications for $9.1 billion and began courting TWC as well, may not give up its new target without a fight. On a conference call with analysts last week, Altice CEO Dexter Goei made it quite clear that his company aims to be the US cable industry's Great Consolidator. (See Bidding War for TWC Looks Likelier and Is Altice the Great US Cable Consolidator?.)
Then there are the regulatory hurdles. To the surprise and puzzlement of top Comcast and TWC executives, the Federal Communications Commission (FCC) moved to block their planned merger, largely because the combined company would have controlled too much of the US broadband market. While the proposed Charter-TWC-Bright House combination would not have the same dominant role, it would control a big chunk of the market.
But FCC Chairman Tom Wheeler may have soothed those concerns with his reported calls to Marcus, Charter CEO Tom Rutledge and other top US cable executives last week to assure them that the Commission wouldn't necessarily oppose any future cable mergers. Without getting into deal specifics, Wheeler reportedly told the execs that the FCC would weigh each prospective deal on its own merits.
— Alan Breznick, Cable/Video Practice Leader, Light Reading