As you may have heard, the Comcast-Time Warner merger was nixed by the government, with Comcast simply walking away from the deal without much damage. As the dust has begun to settle, it appears a new contender has entered the arena, on the heels of the company already acquiring Brighthouse Networks last month. Charter is now looking to acquire Time Warner Cable for $55 billion, and this deal is a bit different than the previous attempt by Comcast.
Charter will end up paying just over $195 per share, almost 15 percent higher than TWC's stock price as of close on May 22. In addition, Charter's recent pickup of Brighthouse Networks will be merged into the end product.
Back in January of 2014, Charter attempted a deal with TWC at $132 per share, which was rejected and called a "low-ball offer" by Time Warner. Comcast then tried to make a merger happen and when they failed, Charter came back in with a higher offer to seal it.
Unlike the Comcast-Time Warner merger, where there was practically no public benefit from having the big two join forces, a deal between Charter and Time Warner joins the distant number four ranked telecom with Time Warner, which stands in second place.
MoffettNathanson business analyst Craig Moffett said that TWC came out the victor in the end.
Time Warner Cable is the obvious winner here; their management team deserves kudos for having played their hand masterfully. That play-one-against-the-other tactic resulted in a huge premium.
By merging with Time Warner and Brighthouse, Charter now moves into big markets like New York, Los Angeles and Dallas. It will also bring the telecom trifecta up to 17 million basic cable customers. For reference, Comcast has 22 million of the same customer.
The deal will still have to go through the FCC's approval process, but Charter's CEO - much like Comcast's CEO - says he's sure it won't be a problem. If it doesn't pass or if one of the companies decide to back out, there is a breakup fee of $2 billion.