Most sources are claiming that Charter Communications is buying Time Warner Cable for $55.33 billion, some are suggesting it’s even higher at $78.7 billion, all we know is; it’s a lot.
[dropcap size=small]L[/dropcap]ast month the largest cable provider in the United States, Comcast, declined a potential bid for Time Warner Cable that was set at $45.2 billion. Comcast had declined the bid due to intense pressure from regulators. Since then, the executives of Charter Communications proposed a deal to Time Warner Cable. The executives seem to be quite confident that regulators will accept the deal. If the deal goes through, Charter Communications will be the second largest cable and internet provider in the United States.
But Time Warner Cable isn’t the only cable provider that Charter aims to acquire. Charter is in the works to buy Bright House Networks, a smaller cable provider, which Charter said this past Tuesday it was buying for $10.4 billion. With online video services like Netflix and Hulu becoming increasingly popular and the cost of television cable rising, the cable industry has been a difficult place for cable providers to thrive in. Keeping this in mind, it’s a smart move on Charter’s part to seek ownership of both Time Warner Communications and Bright House Networks. If the deal goes through with government regulators Charter, combined with Time Warner Cable and Bright House, will have nearly 24 million customers.
Whether government regulators will approve the Charter deal after denying Comcast’s bid for Time Warner Cable has yet to be decided. If the Comcast deal had gone through it would have given the company more than half of the country’s high-speed Internet subscribers. The government denied this deal because it would give Comcast the ability to undermine online video competitors.
“We’re a very different company from Comcast and this is a very different transaction,” said Charter CEO Tom Rutledge on a conference call Tuesday. “We’re confident it’s going to get done,” said Rob Marcus, CEO of Time Warner Cable. However, it doesn’t seem to be a different transaction when you consider that Charter will have less than 30 percent overall of the cable customers in the United States. Tom Wheeler, the chairman for Federal Communications Commission Chairman, said that the FCC weighs every merger on its own to see if it will be in the public interest. He elaborated that “an absence of harm is not sufficient” and the FCC “will look to see how American consumers would benefit” from the deal.
There is a $2 billion break-up fee if the deal fails and doesn’t go through. If government regulators don’t approve it, Charter will have to pay Time Warner Cable. But if Time Warner Cable kills the deal and goes with a different buyer entirely, it will have to pay the $2 billion break up fee. Charter Communications Inc. will provide $100 in cash and shares of a new public parent company equal to 0.5409 shares of Charter for each outstanding Time Warner Cable Inc. share. The transaction values each Time Warner Cable share at about $195.71.
Time Warner Cable is valued at a total of $78.7 billion, including debt. The deal is expected to be completed by the end of the year.