Charter Communications (NASDAQ: CHTR) has officially announced a deal to purchase Time Warner Cable (NYSE: TWC), agreeing to acquire the No. 2 cable operator for $56.7 billion in cash and stock.
The deal values TWC at $78.7 billion and comes just 32 days after Comcast (NASDAQ: CMCSA) walked away from its own $45.2 billion agreement to purchase the company.
Charter also announced that it will move forward with its earlier announced $10.4 billion agreement to purchase Bright House Networks. The combined "New Charter" will have 23.9 million customers in 41 states, becoming the second biggest cable company next to Comcast.
Charter's purchase price for TWC adds up to $195.70 per share, with $100 of that coming in cash and the rest in Charter stock. As part of the deal, John Malone's Liberty Broadband Corp., Charter's biggest shareholder, will purchase $4.3 billion in shares in the combined New Charter.
When it all shakes out, TWC shareholders will own 40 percent to 44.1 percent of the new company, with Bright House parent Advance Newhouse owning 13 percent to 14 percent and Liberty owning 20 percent to 21 percent.
Charter says the transaction will drive investment into broadband services including Wi-Fi, and will accelerate video services innovations such as the Spectrum Guide user interface and World Box.
Last week, Federal Communications Commission Chairman Tom Wheeler reached out to both Charter and TWC, and told them that the regulatory body wasn't necessarily opposed to the deal. On Monday morning, he released a statement saying regulatory approval will be no gimme: "The FCC reviews every merger on its merits and determines whether it would be in the public interest. In applying the public interest test, an absence of harm is not sufficient. The Commission will look to see how American consumers would benefit if the deal were to be approved."
Charter will have to pay a lofty $2 billion breakup fee, unlike Comcast, if it has to walk away from TWC.
So far, media analysts have praised the deal, with Jefferies calling it "priced right" and "a highly accretive transaction."
The agreement comes after a new European player, Luxembourg-based telecom conglomerate Altice SA burst onto the U.S. M&A scene last week and entered its own talks with TWC. Altice, which purchased a $9.1 billion controlling stake in Suddenlink Communications, will now be closely looked at as a possible buyer of Cablevision and other U.S. cable companies.
"With our larger reach, we will be able to accelerate the deployment of faster Internet speeds, state-of-the-art video experiences, and fully-featured voice products, at highly competitive prices," said Tom Rutledge, president and CEO of Charter, in a press release. "In addition, we will drive greater competition through further deployment of new competitive facilities-based WiFi networks in public places, and the expansion of the facilities footprint of optical networks to serve the large, small and medium sized business services marketplace. New Charter will capitalize on technology to create and maintain a more effective and efficient service model. Put simply, the scale of New Charter, along with the combined talents we can bring to bear, position us to deliver a communications future that will unleash the full power of the two-way, interactive cable network."
- read this press release
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