Comcast is bulking up---again. The cable and content giant said that it will acquire Time Warner Cable in a stock swap valued at $45.2 billion. Comcast positioned the Time Warner Cable deal as a way to improve service levels for consumers and transform into more of an enterprise communications provider as it launched its campaign for regulator approval.
Under the deal, Comcast will swap 2.875 shares for each Time Warner Cable share. Comcast said in a statement that it will create about $1.5 billion cost savings and boost free cash flow for shares.
The combined company will have annual revenue of $86.8 billion with EBITDA of $29.4 billion.
To get regulator approval, Comcast said it was prepared to divest assets.
For Comcast, Time Warner Cable adds 11 million subscribers and access to the New York City area and competition with Cablevision. Comcast said it was willing to divest systems covering 3 million subscribers for a net gain of 8 million customers. Comcast CEO Brian Roberts, who last orchestrated a big deal by buying NBC Universal from General Electric, said the company will "yield many synergies and benefits in the years ahead."
On a conference call with analysts, Roberts said:
This transaction will create a world-class blue-chip company committed to innovation.
We will have best-in-class technology, along with a near national platform to drive efficiencies and a meaningful economies of scale.
We have a lot of experience integrating cable assets and our confident upon closing of the transaction, we can put these companies together quickly and efficiently. On the regulatory front, we believe that this transaction is approvable.
Comcast's Neil Smit, CEO of Comcast Cable, will run the combined company. Cable television is a saturated market and mergers and acquisitions are the fastest route to grow the customer base.
Time Warner Cable will give Comcast systems in New York City, Southern California, Texas, Ohio, Wisconsin and North and South Carolina.
Comcast was already stumping for regulator approval and noted there were benefits to acquiring Time Warner Cable including the following:
More Wi-Fi hotspots;
Comcast's platform for streaming video;
Better Ethernet services and cloud services to enterprise;
Combined platforms for advertisers.
Overall, Comcast said its footprint will be less than 30 percent of the total cable market.