Brace yourself for a bitter fight over media conglomeration: The No. 1 cable company and owner of NBCUniversal has a deal with Time Warner Cable to buy it for stock valued at $159 a share, beating Charter Communications’ $132.50 cash-and-stock bid, CNBC’s David Faber reports at the news channel’s website. The deal is set to be announced tomorrow morning, he says. (Comcast owns CNBC.) Each share of TWC, which closed today at $135.31, would be exchanged for 2.875 Comcast shares, which closed at $55.24. That would translate into about $44.2B (not including debt) vs. Charter’s $37.4B bid, which TWC rejected as inadequate. If consummated, a deal would add TWC’s 11.2M video subscribers to Comcast’s 21.7M and give the cable colossus coveted franchises in Manhattan and Los Angeles.
The conventional wisdom, up to now, was that Comcast would help Charter to finance a TWC deal by agreeing to buy some of its systems including New York City and New England. Much as Comcast CEO Brian Roberts salivated over TWC, the thinking went, he had little desire to run the gauntlet in Washington, where antitrust regulators and the FCC likely would look askance at such a big deal — and either reject it outright or insist on lots of restrictions and condition before approving. “Even if Comcast could buy all of TWC — and we doubt it could — it would face very strict conditions that would necessarily reduce the value of any transaction,” MoffettNathanson Research’s Craig Moffett concluded in December. Opponents of a deal likely would argue that Comcast’s would have near-monopoly power over TV and the Internet to determine what networks and technologies could succeed — and to set prices. “Americans already hate dealing with the cable guy, and both these giant companies regularly rank among the worst of the worst in consumer surveys,” Free Press CEO Craig Aaron says. “But this deal would be the cable guy on steroids: pumped up, unstoppable and grasping for your wallet.”
But Guggenheim analyst Paul Gallant said that, while a deal would face strong headwinds, ultimately “cooler heads would prevail.” There’s no cap on how any subscribers one company can control. Still, Faber says that Comcast “will indicate a willingness to divest 3 million subs from the combined company.” Gallant sees no antitrust problem because Comcast and TWC don’t compete with each other. And regulators might look at merger conditions as “a pragmatic way to advance outcomes that the Administration probably cares about regarding pay TV and broadband service” — including net neutrality.
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