Comcast Corp. has swooped in to strengthen its hand as the nation's largest cable company with its acquisition agreement for Time Warner Cable in a deal valued at $45.2 billion.
The Philadelphia-based media giant that also owns NBCUniversal will gain significant leverage and scale in the fast-changing marketplace for video and broadband services as the pay TV industry grapples with the many new ways consumers have to access video.
Brian Roberts said, and it "underscores our belief in the cable business."
Deal values Time Warner Cable at $158.82 per share -- close to the $160 a share that TW Cable had sought in its jousting during the past few months with Charter Communications.
Comcast execs are clearly bracing for regulatory scrutiny. Comcast said it was prepared to divest 3 million of its existing subscribers to clear the way for the deal on the regulatory front. Comcast projects it will end up with about 30 million subscribers once the deal closes, up from its current base of about 22 million.
Notably, Comcast will gain a big presence in the nation's top two TV markets New York and Los Angeles. In L.A., it also inherits Time Warner Cable's megabucks bets on two startup regional spots networks dedicated to the Los Angeles Lakers and Los Angeles Dodgers, respectively.
Although the agreement instantly brought howls from media watchdog groups as being anti-consumer, Comcast execs were forceful in making the case that the deal would not impact competition in any markets, noting that Comcast and TW Cable do not compete in any of the same zip codes.
"The proposed transaction will not reduce competition in any market," said Comcast exec VP David Cohen.
Cohen and Roberts made the case that the deal will expand access to top-tier broadband service in the combined markets and foster the development of cutting-edge new video and data services. They were also quick to point to the national reach of other MVPD player such as sat casters DirecTV and Dish Network.
Neil Smit, prexy of Comcast Cable, will lead the combined companies. Rob Marcus, who only recently took the CEO reins of Time Warner Cable, made it clear that he will be moving on after the deal is completed.
"In addition to creating a world-class company, this is a compelling financial and strategic transaction for our shareholders. Also, it is our intention to expand our buyback program by an additional $10 billion at the close of the transaction," Roberts said in a statement. "We believe there are meaningful operational efficiencies and the adjusted purchase multiple is approximately 6.7x Operating Cash Flow. This transaction will be accretive and will yield many synergies and benefits in the years ahead. (TW Cable CEO) Rob Marcus and his team have created a pure-play cable company that, combined with Comcast, has the foundation for future growth. We are looking forward to working with his team as we bring our companies together to deliver the most innovative products and services and a superior customer experience within the highly competitive and dynamic marketplace in which we operate."
Said Marcus: "This combination creates a company that delivers maximum value for our shareholders, enormous opportunities for our employees and a superior experience for our customers. Comcast and Time Warner Cable have been the leaders in all of the industry's most important innovations of the last 25 years and this merger will accelerate the pace of that innovation. Brian Roberts, Neil Smit, Michael Angelakis and the Comcast management team have built an industry-leading platform and innovative products and services, and we're excited to be part of delivering all of the possibilities of cable's superior broadband networks to more American consumers."
In a statement, Charter indicated that Comcast is overpaying for the company.
"Charter has always maintained that our greatest opportunity to create value for our shareholders is by executing our current business plan, and that we will continue to be disciplined in this and any other M&A activity we pursue," it said.
2014 Variety Media, LLC, a subsidiary of Penske Business Media; Distributed by Tribune Content Agency, LLC
Comcast Creates 'World-Class Company' With Time Warner Cable Acquisition
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