Charter Communications has agreed to purchase Time Warner Cable in a cash and stock deal valued at $78.7 billion, just weeks after the second largest cable operator in the country watched its deal with Comcast crumble amid growing regulatory opposition.
Charter, which began pursuing Time Warner Cable about two years ago, finally snagged the prize, agreeing to pay $100 per share in cash and 0.5409 shares of Charter stock. The deal values Time Warner Cable at $195.71 per share based on Charter’s closing price on May 20, or $200 per share based on Charter’s 60-trading day volume average price. TWC shareholders can opt to take $115 in cash and 0.4562 shares of Charter stock.
Comcast terminated its $67 billion merger with TWC on April 24, 14 months after agreeing to merge with the company, after it became clear regulators would not approve the deal. Charter, which has substantially fewer customers than Comcast, is expected to have an easier go at it during the regulatory aproval process.
At the same time, Charter agreed to purchase Bright House Networks for $10.4 billion, another deal that has been in the works for a while. Combined, the deals will give the combined companies 23.9 million customer relationships, or about 14.8 million video customers.
Liberty Broadband, the tracking stock that holds about 25% of Charter shares, has agreed to purchase about $5 billion in newly issued shares of the combined company.
The deal, expected to close by the end of the year, is a substantial premium to the Comcast deal, which valued TWC at more than $158 per share.
When the dust settles, TWC shareholders will own between 40% and 44% of the new company (depending on which option they take).
In a statement, Charter said the deal will result in faster broadband speeds, greater deployment of WiFi and more advanced services.
“The teams at Charter, Time Warner Cable and Bright House Networks are filled with the innovators of our industry. Representatives of each of these companies have invented some of the most revolutionary communications products ever created; innovations like video on demand, VOIP phone service, remote storage DVR, cable TV through an app, downloadable security and the first backward-compatible, cloud-based user interface. That spirit of innovation will live on, and it will create real benefits and great long-term value for the customers, shareholders and employees of all three companies,” said Charter CEO Tom Rutledge in a statement. “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. In addition, we will drive greater competition through further deployment of new competitive facilities-based WiFi 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. New Charter will capitalize on technology to create and maintain a more effective and efficient service model. Put simply, the scale of New Charter, along with the combined talents we can bring to bear, position us to deliver a communications future that will unleash the full power of the two-way, interactive cable network.”
Rutledge will serve as CEO and a board member of the new company, which will have a 13-member board of directors. The remaining 12 directors will include seven independent directors nominated by the independent directors serving on Charter’s Board of Directors, two directors designated by Advance/Newhouse, and three directors designated by Liberty Broadband. Charter’s current chairman, Eric Zinterhofer, will continue to serve on the new company’s board.
“With today’s announcement, we have delivered on our commitment to maximizing shareholder value,” said TWC’s chairman and CEO Robert Marcus in a statement. “This agreement recognizes the unique value of Time Warner Cable, and brings together three great companies that share a common philosophy of strong operations, great products, robust network investment and putting customers first. This combination will only accelerate the great operating momentum we’ve seen over the last year and provide enormous opportunities for our 55,000 dedicated employees. We remain wholly committed to bringing the very best experience to our residential and business customers coast to coast.”
Bright House CEO Steve Miron seemed equally pleased.
“Today’s announcement is good news for customers and potential customers, as well as our employees, since we will be in a stronger position to deliver competitive services, invest in advanced technology, and develop innovative products that will compete with global and national brands,” Miron said in a statement. “In addition, I am very pleased that Tom Rutledge will be the CEO of the new company. Tom recognizes the importance of placing a high priority focus on customer care drawing from the expertise of all three companies, and I believe this will be a strong pillar of the new company’s culture.”