Charter Communications agreed to buy Time Warner Cable for about $55 billion (R660bn) in cash and stock, scooping up the cable provider after getting last-minute competition from French billionaire Patrick Drahi.
Charter will pay $195.71 a share – 14 percent above Time Warner Cable’s May 22 close – with options of $100 and $115 in cash and the remainder in its own stock, according to a statement released yesterday.
Bright House Networks, a smaller cable company that Charter has previously agreed to buy, will also be merged into the combined entity.
Shareholders
Charter, the fourth-biggest US cable company, is clinching a deal with second-biggest Time Warner Cable after its early 2014 bid was rejected and Comcast jumped in with a competing offer. Charter got another shot when regulatory scrutiny caused the Comcast deal to fall apart last month and then faced competition last week from Drahi’s Altice, which was said to have held merger talks with Time Warner Cable.
Craig Moffett, an analyst at MoffettNathanson, said on Sunday after Bloomberg News reported a deal was near: “The idea that Time Warner Cable and Charter are merging isn’t a surprise, but the price raises some eyebrows. Altice undoubtedly contributed to Charter having to pay such a steep price to close the deal.”
Including debt, the transaction values Time Warner Cable at $78.7bn.
Subscribers
The deal enables Charter, whose largest shareholder is billionaire John Malone, to almost quadruple its number of cable subscribers, gaining 12 million customers in cities including New York, Los Angeles and Dallas.
Time Warner Cable shareholders who choose to receive $100 in cash will get 0.5409 Charter share. They could also elect to receive $115 in cash plus 0.4562 Charter share, the firms said. The transaction, which requires regulatory approval, is expected to be completed by the end of the year.
Dealmaking has been heating up in an industry that faces waning demand for traditional pay-TV packages and competition from Netflix, Amazon and other online services.
Although many analysts predicted a tie-up between Charter and Time Warner Cable, Drahi made a surprise foray into the US on May 20 with the announcement of plans to buy a smaller provider, Suddenlink Communications.
While in the country, he also met with Time Warner Cable chief executive Rob Marcus, according to a person with knowledge of the matter.Cable providers have been expanding their internet offerings to help offset the loss of cable subscribers.
By opposing the Comcast merger, regulators have shown they are taking a hard look at deals that give firms too much power over broadband internet, which is increasingly becoming the way that people watch TV.
Federal Communications Commission chairman Tom Wheeler called Marcus and Charter chief Tom Rutledge recently to dispel notions that industry mergers would not be approved by regulators, a person with knowledge of the calls has said.
Bloomberg