Corp's proposed $45.2 billion takeover of Time Warner Cable Inc could
face close scrutiny from U.S. antitrust regulators because of the deal's
potential to reshape the country's pay TV and broadband markets.
The company resulting from the
merger of the top two U.S. cable service providers would boast a
footprint spanning from New York to Los Angeles, with a near 30 percent
share of the pay TV market as well as a strong position in providing
broadband Internet services.
all-stock deal, announced on Thursday, would put Comcast in 19 of the 20
largest U.S. TV markets, and could give it unprecedented leverage in
negotiations with content providers and advertisers.
friendly takeover came as a surprise after months of public pursuit of
Time Warner Cable by smaller rival Charter Communications Inc, and
immediately raised questions as to whether it would be blocked by the
Department of Justice or the Federal Communications Commission.
Warner Cable shares jumped 6.8 percent to $144.50, still substantially
short of the $158.82 per share value that Comcast put on its offer,
indicating investors' worries about regulatory clearance. Comcast shares
fell 3.5 percent, cutting the per-share offer value to $154.
don't know if the deal is too big to fail to be approved but it is
definitely too big to sail through either the Department of Justice or
the FCC without serious, serious examination," said former FCC Chairman
"Only Comcast could
have paid this price and the combined company, if approved, would tilt
the balance of power at every negotiating table in media and content and
broadband and equipment industries."
Chief Executive Brian Roberts said he was confident about getting the
green light from regulators as the two companies plan to divest 3
million subscribers, so that their combined customer base of 30 million
would represent just under 30 percent of the U.S. pay television video
market. He said no decisions have been made on which markets to sell.
The new cable giant would still tower over U.S. satellite competitor DirecTV, which has about 20 million video customers.
argued that the acquisition would be beneficial to consumers in that it
would roll out its more advanced cloud-based set-top boxes to Time
Warner Cable customers. It also said the deal would eventually result in
higher broadband speeds.
it will not reduce competition in any relevant market be because our
companies do not overlap or compete with each other," Roberts said. "In
fact, we do not operate in any of the same zip code."
new partners are concentrated in different cities. Comcast would fill
in its New Jersey and Connecticut portfolio with Time Warner Cable's New
York City customers, for instance, and add major markets such as Los
Angeles and Dallas.
manager John Paulson, whose Paulson & Co is one of Time Warner
Cable's top 10 shareholders, called the merger "a dream combination."
successful, the deal will be the second time in little more than a year
that Comcast has helped reshape the U.S. media landscape after its $17
billion acquisition of NBC Universal was completed in 2013.
negative is that NBC Universal ownership further complicates regulatory
approval with implications even for usage-based pricing," Wunderlich
Securities Matthew Harrigan said in a research note.
Representatives for the U.S. Federal Communications Commission and the Justice Department could not be reached for comment.
offer price is roughly what Time Warner Cable demanded from Charter and
a 17 percent premium from the No. 2 cable provider's closing price on
Wednesday. Charter shares slid 6.2 percent.
and Time Warner Cable expect to create $1.5 billion in operating
savings, with 50 percent of those savings expected in the first year.
The proposed deal will be accretive to Comcast, which plans to expand
its stock buyback program to $10 billion at the close of the
Comcast is interested
in advertising synergies it would gain by owning the New York City
market as well as the opportunity to expand its business services unit,
its fastest-growing cable division, to a larger footprint.
Comcast, adding New York and Los Angeles has advertising potential,
along with Time Warner Cable's sports assets, which provides an
acquisition target that is simply too compelling to ignore, especially
with an (under-leveraged) balance sheet," said BTIG analyst Rich
The two companies
expect to close the deal, which would give roughly 23 percent of the
merged company to Time Warner Cable shareholders, by the end of the
year. Unusually for a transaction of this size, there is no break-up
Analysts noted that smaller
cable operator Charter, which went hostile this week by nominating a
slate of directors to replace the entire board of Time Warner Cable,
could still be a candidate to acquire some of the assets to be divested.
offered $132.50 per share in a cash and stock deal last month that was
rejected as too low. Officials at the company did not respond to a
request for comment.
between Comcast and Time Warner Cable started about a year ago, but
negotiations gathered pace in recent weeks, people familiar with the
matter said. Time Warner Cable had told Comcast it considered Comcast to
be its preferred buyer once Charter had approached them, the sources
Comcast had also been in
talks with Charter about the possibility of carving up Time Warner Cable
markets, but opted not to participate in a hostile situation, the
Comcast also likely
was attracted to Time Warner Cable's two regional sports networks in Los
Angeles, where it has spent billions on local TV rights for LA Lakers
basketball and LA Dodgers baseball.
deal would be a coup for Time Warner Cable Chief Executive Rob Marcus,
who just ascended to the top job on Jan 1. Filings show that the former
mergers and acquisitions attorney is set to pocket $50 million if Time
Warner Cable is sold and he is replaced while he is CEO.
Morgan, Paul J. Taubman, and Barclays Plc acted as financial advisors
to Comcast. Morgan Stanley, Allen & Company, Citigroup and
Centerview Partners are financial advisors to Time Warner Cable on the