In an early announcement this morning Comcast will purchase Time Warner Cable for about $45.2 billion in stock, creating what will by far be the largest cable TV service provider with about 30 million subscribers. Comcast will have to give up about 3 million subscribers to keep their market share below 30% to avoid antitrust laws, so the deal would essentially net about 8 million new subscribers.
Each Time Warner Cable “TWC” share will be exchanged for 2.875 shares of Comcast “CMCSA” in a deal that gives Comcast 100 percent of Time Warner Cable’s 284.9 million shares outstanding.
Comcast claims the acquisition will produce approximately $1.5 billion in operating efficiencies, in what is called a “friendly, stock-for-stock transaction” between the two companies.
“In addition to creating a world-class company, this is a compelling financial and strategic transaction for our shareholders,” said Brian L. Roberts, Chairman and Chief Executive Officer, Comcast Corporation. Comcast intends to expand their buyback program by an additional $10 billion at the close of the transaction.
The company says the merger will be tax free to Time Warner Cable shareholders.
You may have been following this story throughout Charter Communication’s bids to purchase Time Warner Cable, as a deal between the two companies would have created a formidable competitor to Comcast. But Charter’s offers to Time Warner Cable were described as undervalued and were rejected several times since last spring.
You can expect to see Charter (currently the fourth largest cable TV provider in the US), make a countermove somewhere in the near future, as the deal most certainly gives Comcast an edge in Charter markets.
UPDATE: 4/28/14 Comcast announced a deal that would divest 3.9 million subscribers to Charter.