Reports: Charter Close to Comcast Subscriber Deal

Would Buy 1.5M Subs, Take Minority Interest In Spin
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Charter Communications is close to a deal where it would buy about 1.5 million subscriber from Comcast outright and acquire a minority interest in a publicly traded spin-off containing another 2.5 million customers for a total investment of about $20 billion, according to published reports.

According to a report in the Wall Street Journal, Charter and Comcast were in advance talks on a deal where Charter would buy between 1 million and 1.5 million subscribers outright from Comcast, and would take a minority interest in a publicly traded spin-off that would hold about 2.5 million customers. Bloomberg News added Tuesday that Charter also would swap about 275,000 subscriber it has in the Los Angeles area. The report did not say what systems Comcast would give up. The reports come on the heels of a Financial Times story earlier this week that said Charter could buy 3 million subscribers from Comcast for between $18 billion and $20 billion. Any of the deals would occur only after the Comcast/TWC merger is completed.

Sources familiar with the companies said that negotiations are fluid and that Comcast has been fielding offers from several parties for systems.

“There is a lot of interest in these subs,” said one source in the cable financial community. “But this could fall apart tomorrow.”

Comcast has said from the beginning that it would divest 3 million customers if needed to obtain regulatory approval for its Time Warner Cable acquisition. On a conference call with analysts earlier today, vice chairman and chief financial officer Michael Angelakis said that while the company would not comment on rumor and speculation, its philosophy around the divestiture is based on several factors including tax efficiency, clustering of existing properties and maximizing shareholder value.

“There are a number of potential structures for us to evaluate, maximizing  value for our shareholders will guide our decisions,” Angelakis said on the call. “Some key considerations include amongst others our ability to divest subscribers in the most tax efficient way possible; our ability to shrink our equity base and/or deliver cash to our shareholders; and our ability to maximize our presence in our most strategic markets. We anticipate that any divestiture plan will be a leverage-neutral event for Comcast. In other words, the extent that we sell properties for cash or spin properties, any cash proceeds after neutralizing or maintaining our existing leverage ratio can be used for return of capital to Comcast shareholders .”

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