“Charter Communications Inc. is near an agreement to buy Time Warner Cable Inc. for about $55.1 billion in cash and stock, according to people familiar with the matter,” reports Bloomberg. [UPDATE: As expected, Charter and Time Warner Cable announced this morning, Tuesday, May 26, 2015, that they now have an agreement.]
That’s about $10 billion more than the $45.2 billion Comcast had offered to buy Time Warner Cable (TWC) for last year. Comcast ended that bid earlier this month after the Federal Communications Commission said they would oppose that deal, based on the number of total broadband customers the combined company would have.
But Charter is far smaller than Comcast – and TWC for that matter. When the Comcast-TWC deal was announced, Comcast had about 23 million total subs, and TWC about 15 million total subs, according to then-published reports. After promised sell-offs, the combined Comcast-TWC would have had about 30 million subs.
But in the current proposed deal, in total subs, Charter has 6 million to TWC’s 15 million. Charter has 4.2 million video subs; TWC has 10.8 million. Charter has 4.4 broadband subs; TWC has 12 million. On the phone side, Charter has 2.3 million subs and TWC has 5.6 million.
Notes the Wall St. Journal today, Charter will pay about $195 a share for TWC, which “represents a 14% premium to Time Warner Cable’s closing price of $171.18 on Friday. Last year, Charter had proposed a takeover at $132.50 a share in cash and stock, only to be bested by Comcast’s all-stock bid of just under $160 a share.”
The WSJ adds, “Time Warner Cable shareholders can choose $100 a share in cash and the rest in Charter stock, or $115 in cash and the remainder in stock, a person said.
“As part of the transaction, which could be announced as early as Tuesday, Charter also would merge with small operator Bright House Networks. The combined cable giant would have 23 million total customers, second only to Comcast’s 27 million among cable operators.”
Adds Bloomberg, “Charter has also been renegotiating its offer to buy billionaire Si Newhouse Jr.’s Bright House Networks for $10.4 billion.”
Bloomberg also notes that “[C]ompetition threatened to once again derail the plans of Charter and Mr. Malone: European telecommunications group Altice SA, backed by French cable baron Patrick Drahi, was in hot pursuit of Time Warner Cable in recent days. Mr. Drahi met with Mr. Marcus on May 20 to discuss a potential cash-and-stock deal, The Wall Street Journal reported.
“Now that a deal has been struck with Charter, Altice doesn’t plan to submit a higher offer, according to people familiar with the matter.”
According to USA Today, last week “Altice said…. it’s entering the U.S. market by buying cable operator Suddenlink Communications.” That deal values Suddenlink – the nation’s seventh largest cable operator, with about 1.6 million residential and business subscribers — at about $9.1 billion, USA Today said.
About a possible Charter-TWC combination, the WSJ notes that Charter “is backed by cable pioneer John Malone’s Liberty Broadband Corp. , [and] a union with Time Warner Cable would be the culmination of two years of efforts to become a bigger U.S. cable player and a catalyst for industry consolidation. Liberty will help fund the deal by buying $5 billion of new Charter shares, and Mr. Malone’s stake in the combined entity will fall below 25%, a person familiar with the matter said.”
To read a sidebar item about why the cable operator industry is hot with merger mania, please click here.