America’s two largest cablecos have agreed a US$45.2bn all-stock deal which will see Comcast acquire all 284.9 million of Time Warner Cable’s (TWC) shares. The companies confirmed the deal before markets opened in the US on Thursday morning.
TWC…
America’s two largest cablecos have agreed a US$45.2bn all-stock deal which will see Comcast acquire all 284.9 million of Time Warner Cable’s (TWC) shares. The companies confirmed the deal before markets opened in the US on Thursday morning.
TWC shareholders will end up owning 23% of Comcast once the transaction is completed, and the agreement values their shares at US$158.82 each; based on the last closing price of Comcast shares.
The offer is 20% higher than Charter Communications’ rebuffed US$132.50 per share offer in January.
Charter has been pursuing TWC since last June and had been in discussions with Comcast about selling the market leader a number of TWC’s assets once it had done a deal. An arrangement like that would have enabled Charter to bid more than its snubbed US$132.50 offer, but talks broke down last week.
Comcast CFO Michael Angelakis is said to have stormed out of the meeting with Charter and threatened to do a deal for TWC without Charter’s help, four people familiar with the matter told Bloomberg.
Analysts previously told TelecomFinance that a joint Charter/Comcast bid for TWC was the most likely scenario to get a deal done. They argued Charter could not afford to take over TWC alone, and also that a merger of Comcast and TWC would have a hard time securing regulatory approval.
In December a Federal Communications Commission official had warned that should cableco Comcast attempt to take over rival TWC outright, it would face significant regulatory difficulties in Washington.
But according to details of the transaction published today Comcast has responded by building remedies into the deal.
Homemade remedies
Comcast said it is prepared to divest systems serving approximately three million of TWC’s 11 million managed subscribers. This would give it 30 million customers following the transaction, and its market share would remain below 30% of the total number of combined cable TV and DTH subscribers in the US. Comcast noted this would be equivalent to “Comcast Cable’s subscriber share after its completion of both the 2002 AT&T Broadband transaction and the 2006 Adelphia transaction”.
Speaking to investors on a conference call today, Comcast EVP David Cohen played down regulatory problems: “This is simply not a horizontal merger. Comcast and Time Warner Cable do not currently compete in a single zip code in America.”
He said he expected a lot fewer issues than its US$16.7bn takeover of media and entertainment content company NBC Universal.
“This is not that complicated a deal from an antitrust or regulatory perspective,” he said.
“When you look at the deal it may sound scary, but not when you parse it and realise that you’re ending up with a company with less than 30% of the MVPD [multichannel video programming distributor] marketplace … that’s always been the flashpoint for the government to be concerned.”
Completion set for this year
Cohen expressed hope that the deal could close by the end of the year, although adding that a nine to 12 month regulatory review process was realistic.
He referred to recent comments made by the FCC’s new chairman. Tom Wheeler had implied that the regulator wanted to work harder to stick to internally established deadlines, according to Cohen.
JP Morgan, Paul J. Taubman and Barclays are financial advisers to Comcast. Davis Polk & Wardwell and Willkie Farr & Gallagher are its legal advisers.
Financial advisers to TWC and its board of directors are Morgan Stanley, Allen & Company, Citigroup and Centerview Partners. Paul, Weiss, Rifkind, Wharton & Garrison and Skadden, Arps, Slate, Meagher & Flom are legal advisers.
