Comcast Corp has agreed to buy Time Warner Cable Inc for US$45.2 billion in stock, or US$158.82 per share.
The deal will combine the US’ top two cable TV companies and make Comcast, which also owns NBCUniversal, a dominant force in both creating and delivering entertainment to US homes.
The deal was approved by the boards of both companies and, pending regulatory approval, is expected to close by the end of the year, two people familiar with the matter said late on Wednesday.
The people spoke on condition of anonymity because the deal had not been announced at that point. The announcement was made yesterday.
The price is about 17 percent above Time Warner Cable shares’ Wednesday closing price of US$135.31 and trumps a proposal by Charter Communications Inc to buy Time Warner for about US$132.50 per share, or US$38 billion in cash and stock.
Time Warner Cable shareholders will receive 2.875 new Comcast shares for every Time Warner Cable share they own.
Once the deal is final, they will end up owning about 23 percent of the combined company, one of the people said.
Charter had pursued Time Warner Cable for months, but Time Warner Cable CEO Rob Marcus had consistently rejected what he called a lowball offer, saying he had cut a deal for US$160 per share in cash and stock.
Comcast now plans to divest 3 million pay-TV subscribers after the deal closes.
With 22 million of its own pay-TV customers and Time Warner Cable’s 11.2 million, the combined entity will end up with about 30 million subscribers when the deal is complete, a level believed not to trigger the concern of antitrust authorities.
A formal cap was dissolved years ago by regulators, but divesting subscribers could help the deal get approved more quickly.
Comcast is taking the position that, because Comcast and Time Warner Cable do not serve overlapping markets, the combination of the two will not weaken competition for customers, especially in the face of rivals AT&T and Verizon, which compete with the cable operators to provide both pay TV services and Internet hookups.
Both AT&T and Verizon are growing quickly. They ended last year with 5.5 million and 5.3 million pay TV subscribers respectively.
Comcast and Time Warner Cable are expected to save US$1.5 billion in annual costs over three years, with half of that realized in the first year, one of the people said.
Comcast also plans to add an additional US$10 billion in share buybacks at the close of the deal, on top of a recent plan to boost its share buyback authority to US$7.5 billion from US$1 billion, the person said.
Additional reporting by Bloomberg
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