Comcast has agreed to buy Time Warner Cable for $45.2bn (€33.1bn) in stock, or $158.82 (€116.5) per share, in a deal that will combine America’s top two cable TV companies.
The deal was approved by the boards of both companies and, pending regulatory approval, is expected to close by the end of the year, sources familiar with the matter said. An official announcement is expected to be made later today.
The price is about 17% above Time Warner Cable shares’ Wednesday closing price of $135.31 and trumps a proposal by Charter Communications to buy Time Warner for about $38bn (€27.8bn) in cash and stock worth 132.50 (€97.21) per share.
Time Warner Cable shareholders will receive 2.57 Comcast shares for every Time Warner Cable share they own. Once the deal is final, they will end up owning about 23%of the combined company, one of the people said.
Charter had pursued Time Warner Cable for months but Time Warner Cable chief executive Rob Marcus had consistently rejected what he called a low offer, saying he had cut a deal for $160 (€117.40) per share in cash and stock.
For a time, Comcast stayed in the background, waiting to purchase any chunk of subscribers that a combined Charter-Time Warner Cable would sell off.
Instead, Comcast now plans to divest three million pay-TV subscribers after the deal closes. With 22 million of its own pay TV customers and Time Warner Cable’s 11.2 million, the combined entity will end up with about 30 million subscribers when the deal is complete, a level believed not to trigger the concern of antitrust authorities.
A formal cap was dissolved years ago by regulators, but divesting subscribers could help the deal get approved more quickly.
Comcast is taking the position that because Comcast and Time Warner Cable do not serve overlapping markets, their combination will not reduce competition for consumers, especially in the face of rivals AT&T and Verizon, which compete with the cable operators to provide both pay TV services and internet hook-ups.
Comcast and Time Warner Cable are expected to save $1.5bn (€1.1bn) in annual costs over three years, with half of that realised in the first year, one of the sources said.
Comcast also plans to add an additional $10bn (€7.3bn) in share buy-backs at the close of the deal, on top of a recent plan to boost its share buy-back authority to $7.5bn (€5.5bn) from one billion (€733m), the source added.