US Pay-TV M&A Plot Thickens
The collapse of Comcast's bid to buy Time Warner Cable last month ended several related transactions, including the divestiture of several Comcast/TWC markets to Charter Communications and the formation of a new cable company called GreatLand.
Charter only announced plans to pick up Bright House in late March, but the agreement was always predicated on closure of the Comcast Corp. (Nasdaq: CMCSA, CMCSK)/ Time Warner Cable Inc. (NYSE: TWC) deal. Now that TWC will remain independent (at least temporarily), Bright House is apparently ready to exercise its right to back out of a buy-out by Charter.
If the purchase had occurred, Bright House would have earned $10.4 billion in cash and stock. However, by rejecting the offer, Bright House gets to maintain its existing relationship with Time Warner Cable, which includes the ability to share technology and the right to negotiate discounted programming rates through TWC. (See Charter Snatches Bright House.)
Given that Charter is actively pursuing a new bid to acquire Time Warner Cable, Bright House's independence may still be short-lived. It's highly likely that the smaller operator will remain a part of merger negotiations as the saga of cable consolidation continues.
Meanwhile, as cable companies sort out their future alliances, market attention has turned back to the other major acquisition on the regulatory review docket: AT&T Inc. (NYSE: T)'s proposal to scoop up DirecTV Group Inc. (NYSE: DTV). The Federal Communications Commission (FCC) paused its timeline for examining the deal in March while awaiting a court decision on whether an extended regulatory review team would be granted access to the details of confidential programming contracts. (See FCC Stops Clock on Merger Madness.)
On May 8, however, the US Court of Appeals for the District of Columbia Circuit vacated the FCC's order for programmers to turn over sensitive contract documents. The ruling means that the FCC will likely restart its shot clock soon, albeit without the benefit of certain programming contract information.
Industry watchers expect the AT&T acquisition bid to succeed where Comcast's failed. However, the deal still has its detractors. Among them, Netflix Inc. (Nasdaq: NFLX) filed its concerns with the FCC last week, stating that it believes "The merger would increase the merged entity's ability and incentive to harm OVDs" (online video distributors).
Public Knowledge has also expressed fears to the FCC that letting the deal go through could harm competition from online video distributors and others. The organization has recommended that if the acquisition is approved, AT&T should be required to abide by new Open Internet rules regardless of whether those rules hold up in court.
While some of the M&A activity taking place in the pay-TV and broadband industries is happening in the public eye, much of it is also occurring behind closed doors. The fact that Cablevision Systems Corp. (NYSE: CVC) CEO James Dolan expressed interest last week in a deal to merge with a larger cable operator in the New York market suggests that executives are still feeling their way around different possibilities for consolidation. (See Cablevision Chief Plays the Dating Game.)
Details surrounding any new deals will remain closely guarded until all of the I's are dotted and T's are crossed.
— Mari Silbey, Senior Editor, Cable/Video, Light Reading