Comcast Acquiring Time Warner Cable In All Stock Deal Worth $45.2 Billion
Deal Combines No. 1 and No.2 Cable Operators
Comcast Corp. CMCSA +0.44% is buying Time Warner Cable TWC +0.30% for $45 billion in stock, combining the nation's two biggest cable operators, according to people familiar with the situation.
The boards of both companies have approved the deal, which will be announced in the morning, one of the people said.
With the deal, Comcast almost certainly ends an eight month takeover battle for TWC waged by fourth biggest cable operator Charter Communications Inc. CHTR -0.24% and its biggest shareholder, Liberty Media Corp. LMCA +0.87% , whose chairman is cable pioneer John Malone.
By negotiating the merger, Comcast Chief Executive Brian Roberts ensures his dominance of the U.S. cable industry will be maintained.
Charter's pursuit of TWC, which began after Liberty bought a 27% stake in Charter about a year ago, had raised the possibility that Mr. Malone would emerge as a rival to Mr. Roberts. Mr. Malone once led the U.S. cable industry but sold his previous cable firm, Tele-Communications Inc. in 1999.
In the deal, Time Warner Cable shareholders will receive $158.82 a share in stock for their shares, about $23 a share above where TWC has been trading. Charter has made three offers, the most recent of which was valued at $132.50, all of which were rejected by TWC as too low. Time Warner Cable Chief Executive Rob Marcus had said TWC wanted $160 a share.
News of the deal comes just a couple of days after Charter ratcheted up the pressure on TWC by nominating a group of 13 people as candidates for TWC's board, ahead of this spring's annual meeting.
Time Warner Cable had long seen Comcast as a preferred merger partner. Last year, Time Warner Cable approached Comcast about a deal, hoping to ward off Charter. The two companies had talks off and on. But until a week ago there were signs that Comcast was leaning toward striking a deal with Charter instead.
Comcast and Charter were in talks about a deal where it would endorse Charter's bid in exchange for an agreement where it would buy some East Coast Time Warner Cable systems.
But last Tuesday Comcast and Time Warner Cable reinitiated talks, when Mr. Roberts reached out to Time Warner Cable's Mr. Marcus, one of the people said. Comcast was very uncomfortable with the idea of a proxy fight that Charter was beginning to wage, another of the people said.
Time Warner Cable, in turn, was uncomfortable with the amount of debt Charter would have layered onto the company had it succeeded in buying it, one of the people said. Combined with Comcast, Time Warner Cable would have much more conservative leverage ratios than it would have, had Charter succeeded.
The deal faces high regulatory barriers. Fresh off a defeat over its "Open Internet" rules, the Federal Communications Commission may seek to assert its authority in a merger of the two biggest cable operators, analysts have said.
Comcast not only serves more pay TV customers than any other company in the U.S., nearly 22 million video subscribers, but it also owns entertainment company NBCUniversal, parent of the NBC broadcast network and several big cable channels as well as Universal film studio. Time Warner Cable serves about 11 million video subscribers, although as part of the deal, Comcast has agreed to divest three million subscribers, the people said. Those divestitures will keep its ownership of the pay TV market below 30%, the people said.
Comcast hopes to convince regulators that because cable companies don't compete, their deal should go through.