Comcast, the leading cable operator in the US, has agreed to acquire Time Warner Cable for $159 a share, or an estimated $45 billion in stock. The deal is set to be announced this morning, according to sources familiar with the matter.
Boards of both companies have approved the acquisition and the only possible hindrance to the deal going forward will be regulatory boards in the US.
Comcast has, together with Charter Communications Inc., the US’ fourth largest cable operator, been eyeing TWC for some time. Charter reportedly made three separate offers to acquire TWC in the past, with the most recent offer priced at $132.50 per share – a price that was deemed to be too low by the broadcaster. Following these failed efforts, TWC was said to have approached Comcast to discuss a possible partnership to thwart any moves made by Charter. The talks between Comcast and TWC dragged on for several months though, and there were even signs that Comcast was leaning towards acquiring Charter instead of TWC. The plan was that Comcast would endorse Charter’s bid for TWC, provided that once the deal was done, TWC would sell some of its systems to Comcast.
It wasn’t until last Tuesday that discussions between Comcast and TWC were reinitiated. TWC CEO Rob Marcus apparently didn’t feel comfortable with the proxy fight Charter was planning, nor was he too enthusiastic about the amount of debt the company would be saddled with if it was bought by Charter.
Comcast offered $150 a share when it approached TWC last week, which is much closer to the company’s $160 target price than what Charter offered. Talks were immediately set in motion to convince members of TWC’s board, before, on Wednesday evening, both boards have agreed on a price for the deal.
So what does this deal mean for the leading cable company in the US?
“This leaves Comcast as the sole king of the cable hill, with John Malone and Charter hitting a brick wall in their hopes of becoming a close number-two,” Richard Greenfield, an analyst with BTIG LLC, said in a statement.
“This is a game changer for Comcast.”
As for Charter, it can still make a bid for TWC if the deal with Comcast doesn’t move forward. Even so, it’s likely that this deal took Charter by surprise, as talks between it and Comcast were ongoing. However, other sources have claimed that the Charter-Comcast deal fell through when the latter pressed Charter to divest more TWC assets after acquiring it, something that Charter reportedly didn’t want to do.
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