Comcast Time Warner Cable acquisition in $45 billion deal

A Comcast Time Warner Cable acquisition worth $45 billion has been agreed, creating a giant that will control more than 75% of the American cable industry.

Comcast announced it is to pay approximately $158.82 per share for its arch-rival.

Comcast, which owns the Universal film studio and the NBC broadcast network, is America’s biggest cable TV provider.

In January, Time Warner Cable had received a $60 billion bid from its smaller rival Charter Communications, but turned it down saying the offer was “grossly inadequate”. Today’s announcement ends an 8-month-long attempt by Charter Communications to take over Time Warner Cable.

Comcast Time Warner Cable acquisition will be scrutinized by regulators

Industry experts say the acquisition will be closely examined by US regulators.

Brian L. Roberts, Chairman and Chief Executive Officer, Comcast Corporation, said:

“The combination of Time Warner Cable and Comcast creates an exciting opportunity for our company, for our customers, and for our shareholders. In addition to creating a world-class company, this is a compelling financial and strategic transaction for our shareholders.”

“Also, it is our intention to expand our buyback program by an additional $10 billion at the close of the transaction. We believe there are meaningful operational efficiencies and the adjusted purchase multiple is approximately 6.7x Operating Cash Flow. This transaction will be accretive and will yield many synergies and benefits in the years ahead.”

“Rob Marcus and his team have created a pure-play cable company that, combined with Comcast, has the foundation for future growth. We are looking forward to working with his team as we bring our companies together to deliver the most innovative products and services and a superior customer experience within the highly competitive and dynamic marketplace in which we operate.”

Merged company will have a huge subscriber base

Comcast currently has 22 million paying TV customers. Together with Time Warner Cable’s 11 million the merged company will have 33 million subscribers.

According to Comcast, the two companies work in different markets, so their fusion will not undermine competition for consumers.

While Time Warner Cable operates mainly in New York, Los Angeles, Milwaukee and Dallas, Comcast subscribers are concentrated in Philadelphia, Chicago, Washington and Boston.

The new schoolyard bully?

In a press release, Public Knowledge, a consumer rights group based in Washington, wrote:

“Comcast cannot be allowed to purchase Time Warner Cable. Antitrust authorities and the FCC must stop it. If Comcast takes over Time Warner Cable, it would wield unprecedented gatekeeper power in several important markets.”

“It is already the nation’s largest ISP, the nation’s largest video provider, and one of the nation’s largest home phone providers. It also controls a movie studio, broadcast network, and many popular cable channels.”

It added that the merged company would be “the bully in the schoolyard”, able to dictate terms with Internet companies, content creators and other networks that have to interconnect with Comcast, as well as distributors that must access its content.

Comcast and Time Warner Cable say the merger would save up to $1.5 billion in annual costs over a 3-year period.

Robert D. Marcus, Chairman and CEO of Time Warner Cable, said:

“This combination creates a company that delivers maximum value for our shareholders, enormous opportunities for our employees and a superior experience for our customers.”

“Comcast and Time Warner Cable have been the leaders in all of the industry’s most important innovations of the last 25 years and this merger will accelerate the pace of that innovation.”

“Brian Roberts, Neil Smit, Michael Angelakis and the Comcast management team have built an industry-leading platform and innovative products and services, and we’re excited to be part of delivering all of the possibilities of cable’s superior broadband networks to more American consumers.”

The two companies say the deal is subject to shareholder approval at both firms. Regulatory review and other customary conditions should be concluded by the end of this year, they added.