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Comcast has agreed to acquire Time Warner Cable. for $45.2 billion, combining the two largest U.S. cable companies in an all-stock transaction.
Investors of New York-based Time Warner Cable will receive 2.875 Comcast stock for each of their shares, the companies said in a joint statement Thursday. The deal values each Time Warner Cable share at $158.82, or 17 percent more than its close Wednesday. The transaction, subject to approval by stockholders and regulators, is expected to be completed by the end of 2014.
Comcast Chief Executive Officer Brian Roberts will extend his lead in the U.S. cable-TV market after trouncing John Malone-backed Charter Communications., which had courted Time Warner Cable since June. Holding out for a better offer than Charter’s $132.50-a-share bid allowed Time Warner Cable to deliver an almost 70 percent gain for shareholders since the end of May.
“This leaves Comcast as the sole king of the cable hill, with John Malone and Charter hitting a brick wall in their hopes of becoming a close number two,” Richard Greenfield, an analyst with BTIG LLC, said by e-mail. “This is a game changer for Comcast.”
Time Warner Cable shareholders will own about 23 percent of Comcast’s common stock. The deal will generate savings of about $1.5 billion and increase Comcast’s free cash flow per share, according to the statement. Comcast plans to buy back an additional $10 billion of its shares.
John Demming, a spokesman for Philadelphia-based Comcast, said there is no breakup fee on the transaction.
Charter is unlikely to match Comcast’s bid and is willing to study any assets Comcast would sell, said a person familiar with the matter, who asked not to be identified because the negotiations were private. Comcast will volunteer to divest about 3 million subscribers of the combined company to keep its market share below 30 percent and is willing to sell them to Stamford, Connecticut-based Charter, another person said.
Buying the second-largest U.S cable-TV company brings Comcast more than 11 million residential subscribers. It also gives Comcast access to the New York City cable market and brings it more bargaining power with content providers, Bill Smead, chief investment officer at Smead Capital Management, said in an e-mailed reply to questions.
“This is definitely a bet on a positive future for high- speed access, cable and other services in an economic recovery,” said Smead, whose fund owns Comcast shares.
A tie-up between Comcast and Time Warner Cable would face tough scrutiny from the Federal Communications Commission, Craig Moffett, an analyst at MoffettNathanson, said in an interview in January. The merged company would account for almost three-quarters of the cable industry, according to the National Cable Television Association.