Comcast buys Time Warner
$45.2-BILLION STOCK OFFER: Deal combines two largest cable companies in the U.S.
NEW YORK — Comcast Corp. agreed to acquire Time Warner Cable Inc. for $45.2 billion US in stock, a surprise deal that combines the two largest U.S. cable companies and creates a bulwark against competition from phone and satellite providers.
Time Warner Cable investors will receive 2.875 Comcast stocks for each of their shares, the companies said in a joint statement Thursday. The purchase values each Time Warner Cable share at $158.82, or 17 per cent more than its closing price Wednesday. The transaction, subject to approval by stockholders and regulators, is expected to be completed by the end of 2014.
In sealing the deal, Comcast chief executive officer Brian Roberts trumped a bid from Charter Communications Inc. and its billionaire backer John Malone, who had courted Time Warner Cable for months. The merger also will help the companies cope with an industrywide decline in cable-TV viewers following years of inroads by phone and satellite companies, as well as newer Internet services such as Hulu LLC and Aereo Inc.
“This leaves Comcast as the sole king of the cable hill, with John Malone and Charter hitting a brick wall in their hopes of becoming a close No.2,” said Richard Greenfield, an analyst with BTIG LLC. “This is a game changer for Comcast.”
Holding out for a better offer than Charter’s $132.50-a-share bid allowed Time Warner Cable to deliver an almost 70 percent gain for shareholders over the past year. Time Warner Cable’s stock jumped seven per cent to $144.81 at the close in New York, while Comcast fell 4.1 per cent to $52.97. Time Warner Cable bonds also soared to a nine-month high. The company’s $1.25 billion of 4.5 per cent notes due 2042 climbed 15 cents to 90.55 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Shares of Charter, which now has to plan its next steps after getting locked out of the deal, tumbled 6.3 per cent to $128.91.
Time Warner Cable shareholders will own about 23 per cent of Comcast’s common stock after the transaction is completed. The deal, which doesn’t carry a breakup fee for either side, will generate savings of about $1.5 billion and increase Comcast’s free cash flow per share, according to the statement. Comcast, based in Philadelphia, also announced plans to buy back an additional $10 billion of its shares.
Charter is unlikely to match Comcast’s bid and is willing to study any assets Comcast would sell, said a person familiar with the matter, who asked not to be identified because the negotiations were private. Comcast plans to divest about three million subscribers of the combined company to keep its market share below 30 per cent. It’s willing to sell those customers to Charter, another person said.
Buying the second-largest U.S cable-TV company extends Comcast’s leadership in the industry — adding more than 11 million residential subscribers to Comcast’s 21 million video customers and access to the New York City cable market.