WASHINGTON – Charter Communications is close to a $55 billion deal to acquire Time Warner Cable, a merger that would create a powerful cable and broadband Internet contender in an industry long lacking competition.
The companies were expected to announce their proposed merger early Tuesday morning, with Charter agreeing to pay about $195 a share for Time Warner Cable – $100 in cash and the rest in stock, according to people directly familiar with the deal. The price is 14 percent higher than Time Warner Cable’s closing stock price on Friday and nearly 50 percent above Charter’s bid for Time Warner Cable early in 2014.
The merger comes just weeks after Comcast’s astonishing withdrawal of its merger with Time Warner Cable – a deal that regulators and antitrust officials said would create too much consolidation in the U.S. cable and broadband market and harm consumers.
Time Warner Cable’s return to the seller’s block triggered a flurry of new merger activity and highlighted federal regulators’ willingness to intervene in what they view as an increasingly important industry for consumers that is dominated by too few players, especially Comcast.
Time Warner is the major cable-TV provider in the eight counties of Western New York.
Analysts say Charter’s bid for Time Warner Cable may be accepted by federal regulators because it would create a stronger competitor to Comcast, the biggest cable and Internet provider in the nation with 22 million cable subscribers. Regulators are expected to approve AT&T’s merger with DirecTV for $48 billion, a deal that will create a bigger video service provider than Comcast.
Charter is the nation’s fourth-largest cable firm, with 5.9 million subscribers in 25 states. The deal also includes a merger with BrightHouse, which has 2.5 million subscribers.
If approved by regulators, the combination of the three companies will bring together a total 23 million users.
At the urging of its largest shareholder, billionaire media mogul John Malone, it has tried for the last couple of years to grow through acquisitions.
Unlike Comcast, which also owns vast media properties through NBC Universal, Charter’s purchase of Time Warner Cable appears to be a straight cable deal. Critics’ concern over Comcast’s bid for Time Warner Cable was the potential ability of the company to use its powerful hold on so many home subscribers to create a disadvantage for online video rivals such as Netflix and YouTube that compete both with its cable TV and media properties.
“It appears much less of an antitrust concern than the Comcast deal,” said Gene Kimmelman, a former senior antitrust official for the Justice Department and current president of nonprofit Public Knowledge. “It is more likely to face FCC scrutiny for how it actually promotes the public interest.”
This time, Time Warner Cable appears trying to be more careful to protect its financial interests during a long regulatory review. It has put a $2 billion walk-away fee on the deal in case it falls apart.
The merger was largely expected, with Charter CEO Tom Rutledge signaling in recent weeks his company’s interest in growing through acquisitions.
The deal also comes amid a fast-shifting landscape for cable and Internet service in the United States. Last week the European telecom firm Altice announced a $9 billion deal to acquire Suddenlink.