Cable kingpin John Malone ended his long running pursuit of Time Warner Cable (TWC) yesterday by engineering a $90bn (£59bn) takeover blitz to create the US’s second biggest cable operator.
Charter Communications, a vehicle of Malone’s Liberty Broadband group, will pay $195.71 per share for TWC, valuing the company at $78.7bn including debt.
Charter also said yesterday it will pay $10.4bn for cable provider Bright House Networks, which will be rolled into Charter-TWC to create a newly minted firm called New Charter.
The combined entity will have revenues of $36bn, 23.9m customers and rank second to industry leader Comcast – putting it on course for a showdown with the competition watchdog over concerns the tie-up will dilute competition in the sector.
“The teams at Charter, Time Warner Cable and Bright House Networks are filled with the innovators of our industry,” Charter boss Tom Rutledge, who will run the new entity, said yesterday.
“That spirit of innovation will live on, and it will create real benefits and great long-term value for the customers, shareholders and employees of all three companies.”
Malone’s move to consolidate US cable firms comes as the industry scrambles to fend off the challenge posed by so-called cord cutters, who are turning to video streaming sites like Netflix and Amazon Prime instead of buying cable subscriptions.
Cable companies, once one of America’s most profitable and powerful entities, have been left flat-footed by the switch by consumers to stream content over wi-fi connections.
The TWC deal faces intense scrutiny from US antitrust regulators, who last year busted up another proposed takeover of TWC.
Comcast had agreed to pay $45bn for the firm last April but the deal fell apart after the Federal Communications Commission (FCC) effectively blocked the merger.
Malone had also made a counterbid at the time to try and buy TWC but the offer was rejected in favour of Comcast’s offer.
FCC chairman Tom Wheeler yesterday said: “The FCC reviews every merger on its merits and determines whether it would be in the public interest.”
He added: “In applying the public interest test, an absence of harm is not sufficient. The commission will look to see how American consumers would benefit if the deal were to be approved.”
The deal has a $2bn breakup fee if the takeover falls apart. French rival Altice, led by Patrick Drahi, had been preparing a bid for TWC and could move in if US regulators put Charter’s deal on ice.
TWC was originally part of media conglomerate Time Warner Inc, which owns high profile media brands like Warner Bros and HBO, until it was spun out of the company in 2009.
Shareholders in TWC will be offered the option of $100 or $115 in cash with the rest made up in shares of New Charter.
TWC shareholders will comprise up to 44 per cent of the new firm’s shareholders, while Malone’s Liberty Broadband will own up to 20 per cent.
The owners of Bright House Networks will own up to 14 per cent of the new group.
Advisers on the deal will also share in a $1bn pot of cash being used to pay fees and expenses.
Morgan Stanley, Allen & Company, Citigroup and Centerview Partners all advised TWC while Charter was advised by Goldman Sachs, LionTree Advisors, Bank of America Merrill Lynch and Credit Suisse.