Comcast Upends Charter in $45 Billion Gambit for TWC

Michael Teague |

In a Jan 1 article on Equities.com, telecom analyst Jeff Kagan mused that Time Warner Cable (TWC) , the nation’s number-two cable television service provider, was “rumored to be in play,” going on to suggest that Charter (CHTR) and Comcast (CMCSA) as potential buyers.

The relative accuracy of this prediction was borne out on Thursday, as news broke that Comcast, the nation’s number-one cable television company, was ready to make a major move with its proposed $45 billion takeover of Time Warner.

According to the subsequent tweets, the move was nearly unanimously portrayed in the context of the vast public dislike, if not flat-out hatred, of cable television providers in general.

The deal will see Comcast buy out its erstwhile rival in an all-stock deal, putting an abrupt end to the much scrappier hostile takeover operation that had been mounted by the relatively diminutive Charter Communications.

Squashing Charter's Hostile Takeover

In order to pull this off, however, Comcast CEO Brian Roberts had to make a bold play, which he did by offering his company’s stock at $159 per share, about one dollar short of what Time Warner had been demanding of Charter. The latter, for its part, had settled in for what it thought might be some bargaining, having offered a significantly smaller amount of $132.50 per share. At the same time, Time Warner CEO Robert Marcus, who had stipulated that any deal with Charter be paid for with 60 percent in cash, as well as include protections for his company’s shareholders, seems to have eschewed those concerns when Comcast came knocking.

One of the benefits of the deal, from the perspective of both companies at least, is the projected $1.5 billion in cost-savings that would result. But before anyone gets ahead of themselves, the Federal Communications Commission will certainly want to see some regulatory hurdles cleared.

Regulatory Hurdles

Comcast appears to some extent prepared for this challenge, and has already proposed to sell some 11 million subscribers in order to restrain its market-share to less than 30 percent, in keeping with industry-standards. Still, it is difficult to predict how this will play out over the year or so that it is expected to take for this deal to go through. Combined, both companies touch about 70 percent of US households, some 84 million homes.

Shortly ahead of the closing bell, shares for Time Warner Cable were trading nearly 7 percent higher to $144.50 a piece, while shares for Comcast were off about 4 percent to just over $53. Shares for Charter Communications, meanwhile, were off over 6 percent to $129.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
TWC Time Warner Cable Inc n/a n/a n/a 0
CHTR Charter Communications Inc. 279.00 -5.25 -1.85 1,757,656
CMCSA Comcast Corporation Class A Common Stock 69.23 -0.10 -0.14 8,776,270
OMBP Omni Bio Pharmaceutical Inc 0.02 -0.01 -22.47 59,904

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