Thursday, February 13, 2014

Comcast Agrees to Buy Time Warner Cable for $45 Billion

  1. Wall Street Journal ‎- by Shalini Ramachandran ‎- 1 hour ago
    Comcast has agreed to buy Time Warner Cable for $45 billion in stock, combining the nation's two biggest cable operators. But the transaction ...

    Media & Marketing

    Comcast Agrees to Buy Time Warner Cable for $45 Billion

    Deal Would Combine Nation's Top Two Cable Operators but Faces Lengthy Regulatory Review

    By connect
    Updated Feb. 13, 2014 3:04 p.m. ET
    Comcast's proposed $45 billion deal to buy Time Warner Cable will draw supporters and opponents, covering a range of issues, but it sure to draw the sharp attention of regulators in Washington. Shalini Ramachandran joins MoneyBeat. Photo: AP.
    Comcast Corp. CMCSA -3.98% agreed to buy Time Warner Cable TWC +6.87% for about $45.2 billion in stock, in a deal that would combine the nation's two biggest cable operators.
    The boards of both companies have approved the transaction, which was announced Thursday.
    With the proposed deal, Comcast almost certainly ends an eight-month takeover battle for Time Warner Cable waged by fourth-largest cable operator Charter Communications Inc. CHTR -6.24% and its biggest shareholder, Liberty Media Corp. LMCA +0.33% , whose chairman is cable pioneer John Malone.

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    Join a live video chat at 3 p.m. EST on what you need to know about the deal between Comcast and Time Warner Cable.
    By negotiating the deal, Comcast Chief Executive Brian Roberts ensures his dominance of the U.S. cable industry will be maintained. But the transaction is expected to face a lengthy regulatory review.
    Charter's pursuit of Time Warner Cable, which began after Liberty bought a 27% stake in Charter about a year ago, had raised the possibility that Mr. Malone would emerge as a rival to Mr. Roberts. Mr. Malone once led the U.S. cable industry but sold his previous cable firm, Tele-Communications Inc., to AT&T T +1.40% in 1999.
    In the deal, Time Warner Cable shareholders will swap each share for 2.875 Comcast shares, valuing the company at $158.82 per share, based on Comcast's closing price Wednesday. Time Warner Cable shareholders will own about 23% of the combined entity.
    Enlarge Image
    Charter has made three offers, the most recent of which was valued at $132.50, all of which were rejected by Time Warner Cable as too low. Time Warner Cable Chief Executive Rob Marcus had said Time Warner Cable wanted $160 a share.
    The combined cable operations will be led by Comcast President and CEO Neil Smit, and Comcast expects the deal to add to earnings in the first year it is completed.
    The companies said they expected to generate about $1.5 billion in operating efficiencies from the tie-up. Comcast Chief Financial Officer Michael Angelakis said during a call with reporters Thursday that the efficiencies will be spread out in a variety of areas, but a "minority" amount will come from programming savings.
    The companies expect to capture half of those savings in the first 12 months after the transaction, and the remaining savings should come in the following two years, he said.
    Comcast also said it is going to expand its buyback program by an additional $10 billion at the close of the transaction, which is expected at the end of 2014.
    To reduce competitive concerns, Comcast is prepared to divest systems serving about 3 million managed subscribers and will, through the acquisition and management of Time Warner Cable systems, net about 8 million managed subscribers in this transaction.
    News of the deal comes just a couple of days after Charter ratcheted up the pressure on Time Warner Cable by nominating a group of 13 people as candidates for Time Warner Cable's board, ahead of this spring's annual meeting.
    Barron's Brendan Conway joins the News Hub with details on Comcast and Time Warner Cable's $45 billion deal. Plus, what do the weekly jobless claims and January retail sales numbers mean for the economy? Photo: AP.

    Cable Megadeal

    In a statement late Wednesday, Charter said it "has always maintained that our greatest opportunity to create value for our shareholders is by executing our current business plan, and that we will continue to be disciplined in this and any other M&A activity we pursue."
    Time Warner Cable had long seen Comcast as a preferred partner. Last year, Time Warner Cable approached Comcast about a deal, hoping to ward off Charter. The two companies had talks off and on. But until a week ago there were signs that Comcast was leaning toward striking a deal with Charter instead.
    Comcast and Charter were in talks about a deal in which Comcast would endorse Charter's bid in exchange for an agreement where it would buy some Time Warner Cable systems on the East Coast from Charter, if Charter were successful in buying Time Warner Cable.
    But last Tuesday Comcast and Time Warner Cable re-initiated talks, when Mr. Roberts reached out to Time Warner Cable's Mr. Marcus, one of the people said. Comcast was very uncomfortable with the idea of a proxy fight that Charter was gearing up to wage, another of the people said.
    Time Warner Cable, in turn, was uncomfortable with the amount of debt Charter would have layered onto the company had it succeeded in buying it, one of the people said. Combined with Comcast, Time Warner Cable would have much more conservative leverage ratios than it would have, had Charter succeeded.
    Comcast approached Time Warner Cable last week with an offer to buy the entire company at about $150 a share, a person familiar with the matter said. As the offer was much closer to the $160 a share Time Warner Cable was looking for, it sparked the renewed talks. Comcast's Mr. Roberts at times negotiated with top Time Warner Cable brass, including Mr. Marcus and Chief Financial Officer Artie Minson on the phone from Sochi, where Mr. Roberts has been visiting for the Winter Olympics.
    On Wednesday evening, Time Warner Cable's board met around 5 p.m. to discuss the deal, around the same time Comcast's board was meeting. By about 8 p.m., the boards had approved the deal. Mr. Roberts said a deal document was signed at about 1:30 a.m. Thursday.
    Charter's pursuit of Time Warner Cable had raised the possibility that cable pioneer John Malone, shown in July, would emerge as a rival to Comcast's Brian Roberts. European Pressphoto Agency
    Introducing WSJD, the Journal's new home for tech news, analysis and product reviews.
    "The last week was a real flurry," he told reporters Thursday.
    The deal faces high regulatory barriers. Comcast not only serves more pay-TV customers than any other company in the U.S., nearly 22 million video subscribers, but it also owns the entertainment company NBCUniversal, parent of the NBC broadcast network and several big cable channels as well as Universal film studio. Time Warner Cable serves about 11 million video subscribers. Comcast is prepared to divest three million subscribers, the people said. Those divestitures will keep its ownership of the pay TV market below 30%, the people said.
    Comcast hopes to convince regulators that because cable companies don't compete, their deal should go through.
    "We believe that this transaction is approvable. It is proconsumer, procompetitive and strongly in the public interest," Mr. Roberts said on a conference call. "It will not reduce competition in any relevant market because our companies do not overlap or compete with each other." The companies added that the deal does not include a breakup fee, should the acquisition not close.
    Any bid for Time Warner Cable would have to be approved by both the Federal Communications Commission and the Justice Department, which hasn't been shy about bringing antitrust enforcement actions against would-be mergers that it believes will harm competition. Last year, the department's antitrust chief, Bill Baer, challenged major mergers in the beer and airline industries, though both cases ultimately settled and the deals were allowed to proceed after the companies made several concessions.
    However, recent events may give Comcast a better shot at securing regulatory approval.
    Purchasing Time Warner would give Comcast roughly a third of the national cable market, raising concerns over whether the combined company would have too much leverage over content providers in negotiations. However, the deal may benefit from the perception of some regulators that cable is a natural monopoly whose primary competition comes from satellite providers and telephone companies like Verizon Communications Inc. VZ -0.01% and AT&T Inc. The FCC previously tried to impose a 30% horizontal ownership cap on the cable industry, but the D.C. Circuit Court of Appeals threw out that limit in 2009.
    Since then the commission approved Comcast's purchase of NBCUniversal, giving it a strong foothold in the content industry and control over one of the four broadcast networks. Comcast agreed to a wide range of conditions as part of that deal, including a promise not to discriminate against third-party content traveling over its networks for seven years. Having recently lost a court challenge to its Open Internet rules, the FCC could force Comcast to agree to extend its net neutrality agreement as part of any review.
    —Gautham Nagesh, Brent Kendall and Ben Fox Rubin contributed to this article.
    Write to Shalini Ramachandran at shalini.ramachandran@wsj.com and Dana Cimilluca at dana.cimilluca@wsj.com
    end quote from: 

    Comcast Agrees to Buy Time Warner Cable for $45 Billion

    This is a disaster for U.S. Cable Subscribers in general. Monopolies like Verizon in Telecom and Comcast in Cable are only going to bring less service for more money to present cable subscribers.

    Also, because so many average Comcast cable subscribers didn't get the Olympics at all (only high end packages got it) I think you will see many more younger people under 40 giving up Cable completely in protest which likely will change the dynamics in Cable nationwide even further to some new dynamic.

    Many younger people under 40 already don't get cable and only use the Internet and Roku types of devices to stream things onto their TVs  already. This likely will just increase that number over time with this new change.

     

     
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