- TWC is trading ~8% higher in pre market at $146.05, but off of earlier highs
- CMCSA is trading ~4% lower in pre market at $53.00
Time Warner Cable: Color on CMCSA/TWC merger
As me mentioned early this morning, Time Warner Cable to be acquired by Comcast (CMCSA) for ~$159 per share, according to reports - see 02:24 for our initial comment. CMCSA confirmed at 6:30.
- Wunderlich notes CMCSA is making a $159 per share/$45.2bn all equity friendly bid for TWC. The deal is, however, problematical, from the vantage point of the FCC and DOJ, with reservations having been expressed last year by FCC Commissioners - even with no black letter cable ownership cap. If Comcast just enabled TWC to hit its 2016 biz plan, firm would arrive at TWC fair valuation ranging from $158 to $172, sans synergies and NBCUniversal benefits. The pre-synergy deal multiple appears to be near 8.1x 2014E OCF (WSI above OCF consensus), although a supposed $1.5bn in cost savings (let alone sales growth and customer retention) lowers the multiple to 6.9x and adds $29 per share in value.
- RBC notes, according to multiple sources, Comcast and Time Warner Cable, the two largest cable companies with a combined 61% share of cable TV subscribers, have agreed to an all-stock purchase of TWC for $159/share. This implies an 8.3x EV/EBITDA multiple based on firm's 2014 EBITDA estimate for TWC and follows Charter's recent bid for TWC for $132.50 per share, whichTWC management rejected. RBC believes regulatory approval is possible, and have estimated annualizeds synergies in the mid $400M range.
- FBR notes reports that Comcast and Time Warner Cable have agreed to merge, rebuffing CHTR's Liberty-backed bid. The initial investor reaction could be cautionary for TV network stocks, as well as Liberty Media and SIRI. However, FBR would buy against the concerns. FBR reiterates Outperform ratings on LMCA, SIRI, TWX, DIS, DISCA, VIAB, FOXA, VIAB.