Charter Buying Time Warner in $56 Billion Mega-Deal
Charter Communications Inc. has agreed to buy Time Warner Cable Inc. in a $56 billion deal that would combine the third and second largest U.S. cable operations in an effort to go up against Comcast Corp.
John Malone’s Charter is offering to pay $195.71 in cash-and-stock for each Time Warner share based on the May 20 closing price, Reuters reported. The deal values Time Warner at $78.7 billion, including debt.
“No one has ever had a better sense of the multichannel world than John Malone,” InterMedia Partners managing partner Leo Hindery told The Wall Street Journal.“Obviously he sees in Charter and Time Warner Cable a way to perpetuate a legacy that is unrivaled.”
According to researcher firm MoffettNathanson, the merger would create a company controlling more than 20 percent of the U.S. broadband market, Reuters noted.
“Regulatory approval is no longer a given but we expect this is highly probable and greater than Comcast-Time Warner,” Macquarie Research analyst Amy Yong wrote in a note to Reuters.
Citing regulatory concern, Comcast broke off a deal to purchase Time Warner for $45 billion.
Last year, Time Warner rejected an offer from Charter for $37 billion.
The Federal Communications Commission immediately noted it would closely scrutinize the deal for both absence of harm and benefit to the public.
“The Commission will look to see how American consumers would benefit if the deal were to be approved,” Chairman Tom Wheeler said in a statement, Reuters reported. “In applying the public interest test, an absence of harm is not sufficient.”
Time Warner’s shares were up 7.8 percent in premarket trading Tuesday, below Charter’s offer, causing concern about regulation.
The merger would result in a new public company known as New Charter.
“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,” Charter CEO Tom Rutledge said in a statement,according to CNN Money.
Also forming a partnership with Advance/Newhouse, parent of cable operator Bright House Networks, Charter would pay $2 billion in cash and purchase Bright House for $10.4 billion.