Charter acquires Time Warner Cable in $78.7 billion deal

The expected buyout has been confirmed as well as a twist in the story of Bright House Networks. [UPDATED]

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UPDATE 12.49 GMT: Investor presentation details added.

Charter Communications has agreed to purchase Time Warner Cable in a cash and stock deal valuing the company at $78.7 billion.

The buyout was announced on Tuesday. Under the terms of the deal, Charter will pay $100 in cash and shares of a new parent company -- dubbed New Charter -- equivalent to 0.5409 shares of Charter for each Time Warner Cable share outstanding; raising Time Warner individual share value to $195.71.

In addition, Charter will give Time Warner Cable stockholders an election option to receive $115 in cash and New Charter shares equivalent to 0.4562 shares of Charter for each Time Warner Cable share they own.

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The deal gives Charter a subscriber pool strong enough to compete with the US' largest cable provider, Comcast.

In addition, Charter and Advance/Newhouse Partnership, the parent company of Bright House Networks -- the 6th largest cable provider in the US -- have amended an agreement signed in March this year, whereby Charter will acquire Bright House for $10.4 billion.

In light of the merger, the new agreement will result in a joint partnership in which New Charter will own between 86 and 87 percent of the partnership business whereas Advance/Newhouse will own between approximately 13 and 14 percent.

Upon the closure of the transaction, Liberty Broadband has also agreed to purchase $4.3 billion in shares of New Charter at a price the equivalent of $176.95 per share. Liberty also plans to snap up $700 million in newly-issued Charter shares at $173 per share upon the closure of the Charter-Advance/Newhouse deal.

Although not set in stone and subject to the closure of both the Charter-Time Warner Cable and Charter-Advance/Newhouse deals, Time Warner shareholders -- excluding Liberty Broadband and affiliates -- are expected to own between approximately 40 and 44 percent of New Charter. Advance/Newhouse is expected to own between 13 and 14 percent of the company, and Liberty Broadband is expected to own between approximately 19 and 20 percent of the new firm.

The companies say the combination of Time Warner Cable and Bright House resources will create "a leading broadband services and technology company serving 23.9 million customers in 41 states."

The acquisition will also result in additional investment being poured into the combined company's broadband networks, allow for wider deployment of public W-Fi hotspots and expand optical networks designed to support small and medium-sized businesses, as well as a boost for innovation and research.

The firms also say the merger is part of a plan to return offshore jobs to the United States.

"This will result in faster broadband speeds, better video products, including more high definition channels, more affordable phone service and more competition, for consumers and businesses," the companies claim.

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

"With today's announcement, we have delivered on our commitment to maximizing shareholder value. 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."

New Charter will be led by Tom Rutledge, who has served as CEO and President at Charter Communications since February 2012. At the time of closing, New Charter's Board of Directors will consist of 13 directors including Rutledge, who will be offered the position of Chairman.

In an investor's presentation (.PDF) on the subject of the acquisition, at a glance, the companies' structure and financials based on last year's results are as follows:

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The Charter-Time Warner Cable deal is subject to approval by both Charter and Time Warner Cable shareholders and regulatory approval, as well as a separate vote on the Liberty transactions. The three companies expect to close the deals by the end of 2015.

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