Comcast, the nation's largest cable operator, wants to get even larger. Already the dominant player in providing pay television services to American consumers, Comcast announced on Thursday a deal for Time Warner Cable's boards, which will create a behemoth that will dominate the media industry.
It is the second transformative deal for Comcast in recent years, coming just months after it completed an acquisition of NBC Universal, the TV and movie studio. And the deal, if completed, could have impacts on consumers across the country, though it is unlikely to reduce competition in many markets.
Describing the deal as "a friendly, stock-for-stock transaction," Comcast will acquire 100 per cent of Time Warner Cable's 284.9 million shares outstanding, in a deal worth about $45.2 billion in stock value.
The deal will leave Time Warner Cable shareholders owning approximately 23 per cent of Comcast's common stock.
"The financial benefits of this are attractive and will create sustainable benefits for years to come," Comcast's CEO, Brian Roberts, said on a conference call on Thursday.
Comcast is also expanding its share repurchase programme to $10 billion, a move that will somewhat offset the dilution from issuing so many new shares as part of the deal.
Comcast and Time Warner Cable do not overlap in any markets, meaning that there are no consumers who will see their choices in cable operators diminished as a result of a deal.
"We do not operate in any of the same ZIP codes," Roberts said. "We believe this transaction is approvable," Roberts said. "It is pro-consumer, pro-competitive, and strongly in the public interest."
Nonetheless, about 8 million current Time Warner Cable customers will become Comcast customers. That may be a good thing for those customers, as Comcast is seen as an industry leader in terms of providing high-quality television and Internet services, while Time Warner Cable has a reputation for poor customer service.
For the three million customers that Comcast plans to divest, they will likely see their service taken over by other regional cable operators such as Cox, Cablevision or Charter Communications.
Comcast will acquire a net of about eight million subscribers, bringing its total customer base to about 30 million. Comcast noted in its news release that it would have less than 30 per cent of the market share for pay television subscribers in the United States after the deal.
Time Warner Cable executives also said the move would benefit its customers.
"On a personal level, it's never easy to cede control of a company," said Rob Marcus, Time Warner Cable's chief executive. "However in this case, it just makes too much sense."
The merger is almost certain to bring to an end a protracted takeover battle that Charter Communications has been waging for Time Warner Cable. Last month, Charter proposed to acquire Time Warner Cable for $132.50 a share, an offer Time Warner rebuffed as "grossly inadequate."
On Thursday, Charter did not address the deal directly, saying only that "Charter has always maintained that our greatest opportunity to create value for our shareholders is by executing our current business plan, and that we will continue to be disciplined in this and any other M.&A. activity we pursue."
The merger agreement between Comcast and Time Warner Cable is also subject to shareholder approval at both companies. The companies said the deal was expected to close by the end of the year.
J.P. Morgan, Paul J. Taubman, and Barclays served as the financial advisers to Comcast and Davis Polk & Wardwell and Willkie Farr & Gallagher were its legal advisers. Morgan Stanley, Allen & Company, Citigroup and Centerview Partners advised Time Warner Cable and its board, while Paul, Weiss, Rifkind, Wharton & Garrison and Skadden, Arps, Slate, Meagher & Flom served as legal advisers.
©2014 The New York Times News Service
