Charter Communications finally got its prize. After more than 15 months of negotiations and trying to surmount various regulatory hurdles, it looks like Charter has finally got a firm deal in place to buy Time Warner Cable for close to $55 billion in cash and stock. Analysts point out Charter snagged the fourth largest global cable provider after outlasting Comcast and out-bidding from French businessman Patrick Drahi and his firm Altice.
According to the terms of the merger announced Tuesday morning, Charter is paying $195.71 a share (a 14% premium to TWC’s Friday close) with options of either $100 or $115 in cash and the rest in shares. Of note, a smaller cable company that Charter had already agreed to purchase, Bright House Networks, is included as part of the deal.
David Einhorn Buys Three New Stocks: These Are The Names And Theses (Q3 Letter)
David Einhorn's Greenlight Capital funds returned 5.9% in the third quarter of 2020, compared to a gain of 8.9% for the S&P 500 in the same period. This year has been particularly challenging for value investors. Growth stocks have surged as value has struggled. For Greenlight, one of Wall Street's most established value-focused investment funds, Read More
TWC shareholders who opt for $100 in cash will also receive 0.5409 share of Charter. Those who opt for $115 in cash will receive 0.4562 Charter share.
Of note, regulatory approval is required for the deal, and it is anticipated to finalize by the end of 2015.
More on Time Warner Cable – Charter Communications merger
Charter has managed to snap up Time Warner Cable despite its earlier 2014 bid being rejected and Comcast making a competing offer. Regulatory issues eventually caused the Comcast – TWC deal to break down a month or so ago, and then new competition from Drahi’s Altice SA also surfaced last week.
“The idea that Time Warner Cable and Charter are merging isn’t a surprise, but the price raises some eyebrows,” Craig Moffett, an analyst at MoffettNathanson noted on Sunday after Bloomberg News broke the news of an impending deal. “Altice undoubtedly contributed to Charter having to pay such a steep price to close the deal.”
Including debt, the deal puts a value of $78.7 billion on Time Warner Cable. John Malone’s Charter Communications has quadruple its number of cable subscribers in one fell swoop, adding on 12 million customers in major cities such as New York, Los Angeles and Dallas.
Analysts from JPMorgan write in a research report issued after the deal was announced:
We assume $800-900 million in synergies in the Charter-TWC deal, which compares to a $700 million synergy number which press reports have attributed to John Malone, and another ~$160 million in synergies with Bright House. Note that TWC and Bright House have a longstanding deal to work together on programming and technology, so synergies between TWC and BHN are limited, and the synergy number from the previous Charter-BHN deal was very complicated.