TWC Moves On Quickly From Comcast, Will Sell to Charter for Even Bigger Price Tag

Josh Long**Editor’s Note: Please click here for a recap of the biggest channel-impacting mergers in Q1 2015.**

Can Charter succeed where Comcast failed?

Charter Communications on Tuesday announced plans to merge with Time Warner Cable and amend an agreement to acquire Bright House Networks under deals that would transform Charter into the second-largest cable provider behind Comcast Corp.

The planned stock-and-cash acquisition of Time Warner Cable (TWC) values the cable company at $78.7 billion, Charter said in a news release, and was announced just weeks after Comcast pulled out of a $45.2 billion deal to acquire TWC in the face of resistance from federal regulators.

Under the agreement, Charter will provide $100.00 in cash and shares of a new public parent company (“New Charter”) equivalent to 0.5409 shares of Charter for each TWC share outstanding. The agreement values each TWC share at around $195.71 based on Charter’s market closing price on May 20.

Through the TWC and Bright House Networks transactions, Charter said it will serve 23.9 million customers in 41 states. The mergers will make Charter one of the largest broadband providers in the consumer market and increase its ability to service businesses. Comcast, the largest cable company, serves 27.2 million customers.

Charter’s blockbuster announcement includes plans to amend an agreement it previously struck to acquire Bright House Networks for $10.4 billion. After the original deal was announced this spring, some master agents expressed optimism that the merger would benefit the indirect sales channel.

The 22-year-old Charter had 386,000 commercial customer relationships at the end of last year, and on a pro forma basis, 2014 commercial revenues rose more than 18 percent, to $993 million. By comparison, TWC’s 2014 business revenues rose 22.8 percent to $2.8 billion, and the cable company ended the year with 687,000 business customers.

“With our larger reach, we will be able to accelerate the deployment of faster Internet speeds, state-of-the-art video experiences, and fully-featured voice products, at highly competitive prices,” said Charter CEO Tom Rutledge, who will lead the merged company. “In addition, we will drive greater competition through further deployment of new …

… competitive facilities-based Wi-Fi networks in public places, and the expansion of the facilities footprint of optical networks to serve the large, small and medium-sized business-services marketplace.”

Charter’s acquisition of TWC isn’t certain to close. It must clear a number of potential hurdles, including approval by the U.S. Justice Department and Democrat-led Federal Communications Commission.

“The FCC reviews every merger on its merits and determines whether it would be in the public interest,” FCC Chairman Tom Wheeler said, commenting on Charter’s announcement. “In applying the public interest test, an absence of harm is not sufficient. The Commission will look to see how American consumers would benefit if the deal were to be approved.”

Noting that a Charter-TWC tie-up “would represent a critical change to the cable and broadband industry landscape,” Berkeley Research Group’s Todd Antonelli says that “Charter’s offer for Time Warner Cable and Bright House Networks will create a strong competitor for Comcast. As with other industry consolidations it is always fascinating to watch competitors combine forces.”

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