Thursday, February 13, 2014

Comcast's $45.2 billion acquisition of Time-Warner Cable faces high regulatory hurdles

Comcast has just ponied up $45.2 billion in an all-stock deal to acquire Time Warner Cable, Bloomberg reported on Thursday. Time Warner Cable shareholders will receive 2.875 shares of Comcast stock for each of their shares, whiles values each Time Warner Cable share at $158.82, or 17 percent more than its close on Wednesday. The acquisition -- subject to approval by stockholders and regulators -- is expected to be completed by the end of 2014, the companies said.

The deal values Time Warner Cable at about $69 billion including net debt, or 8.3 times its estimated 2014 earnings before interest, taxes, depreciation and amortization.

It's hard to believe this deal will be a slam dunk, by any means, though, considering its size. It will merge the nation's no. 1 and no. 2 cable companies. Considering that the DOJ would not allow no. 2 wireless carrier AT&T to acquire no. 4 T-Mobile USA, it's easy to see there could be some issues with the deal. Unlike that deal, though, John Demming, a Comcast spokesman, said there is no breakup fee on the transaction.

Charter Communications had been courting TWC since June of last year. People familiar with the matter said that the Comcast-TWC caught Charter flat-footed, as Comcast and Charter had been negotiating an asset sale after a potential Charter acquisition of TWC. Sources said it is unlikely that Charter would match Comcast's offer, and that instead it might look to acquire any assets Comcast would opt to sell.

Critics say the merger would reduce competition in the cable industry. Advocates say that larger companies have better leverage when it comes to negotiating with content providers.

In early morning trading, Comcast shares were at $53.39, down $1.85 or 3.35 percent. TWC shares were at $144.89 , up $9.58 or 7.08 percent.

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