Time Warner close to $55B cable merger
Charter Communications deal would create new powerhouse
NEW YORK — Time Warner Cable Inc. is nearing an agreement to be acquired by smaller peer Charter Communications Inc. for about $55 billion, combining the second- and third-largest U.S. cable operators, people familiar with the matter said on Monday.
The deal is expected to be announced today.
A deal would create a major rival to Comcast Corp., the biggest operator in the U.S. cable and broadband market, and marks a triumph for Charter, which was rejected by Time Warner Cable just last year.
News of another potential merger comes as the traditional pay television industry faces stagnating growth and new competition from over-the-Web rivals offering individual services, like Netflix, or packages of channels, such as Sony. A larger company in this sector could achieve greater economies of scale, including in negotiations with programmers.
The cash-and-stock deal values Time Warner Cable at $195 per share, according to sources, and comes just one month after Comcast dropped its $45.2 billion merger agreement with Time Warner Cable, clinched in February 2014, over antitrust concerns.
A merger of Charter and Time Warner Cable, with other related deals, would eliminate one of the country’s top Internet providers
and control more than 20 percent of the broadband market, according to data from MoffettNathanson in New York City. The Comcast-Time Warner Cable deal rejected by regulators would have created a provider with roughly 40 percent of the U.S. high-speed Internet market.
Media mogul John Malone, whose Liberty Broadband Corp. is Charter's largest shareholder, has advocated strongly for the deal, and Liberty is supporting the deal by acquiring $5 billion in new Charter stock, one of the people said.
Charter hopes its deal for Time Warner Cable will be viewed more favorably by regulators. Federal Communications Commission Chairman Tom Wheeler reached out to the chief executives of the two companies last week to convey that the agency is not opposed to any and all cable deals, The Wall Street Journal reported. Any deal would be considered on its own merits, the paper quoted Mr. Wheeler as saying.
One of the chief areas of concern for regulators in a merging industry is competition in Internet broadband.
Charter will also acquire Bright House Networks, the sixth-largest U.S. cable operator, for $10.4 billion, the sources added. The combined companies could have as many as 23 million total customers, just behind Comcast’s 27.2 million customers.
Charter was competing for Time Warner Cable against French telecommunications group Altice SA, which last week agreed to buy U.S. regional cable company Suddenlink Communications for $9.1 billion from private equity investors, making its first move across the Atlantic.
“The idea that Time Warner Cable and Charter are merging isn’t a surprise, but the price raises some eyebrows,” said Craig Moffett, an analyst at MoffettNathanson. “Altice undoubtedly contributed to Charter having to pay such a steep price to close the deal.”
Charter asked for deal negotiations with Time Warner Cable to be speeded up after Altice expressed interest, one of the people said. Altice did not have enough time to address all of Time Warner Cable’s concerns over a merger between the two of them.
Altice will not seek to outbid Charter for Time Warner Cable and may now consider other possibilities for acquisitions in the U.S., two people said.