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Well now its official, the Comcast, Time Warner merger is on! This is how the official announcement fairly matter of factly put it today:
“Comcast Corporation (Nasdaq: CMCSA, CMCSK) and Time Warner Cable (NYSE: TWC) today announced that their Boards of Directors have approved a definitive agreement for Time Warner Cable to merge with Comcast. The agreement is a friendly, stock-for-stock transaction in which Comcast will acquire 100 percent of Time Warner Cable’s 284.9 million shares outstanding for shares of CMCSA amounting to approximately $45.2 billion in equity value.”
Time Warner shareholders will receive 2.875 shares of Comcast for each Time Warner Cable share that they own in a transaction that sees Comcast as the surviving entity after the merger. Once the transaction closes Time Warner shareholders will then own approximately 23% of Comcast’s common stock in a deal that valued each Timer Warner Cable share at US$158.82 per share based on yesterday’s closing price for Comcost stock.
The companies claim the merged entity can generate as much as $1.5 billion of operating efficiencies, though it is unclear if these are one-time or recurring.
In proudly confirming the deal Brian Roberts, Chairman and CEO of Comcast, said “The combination of Time Warner Cable and Comcast creates an exciting opportunity for our company, for our customers, and for our shareholders, ” adding: “In addition to creating a world-class company, this is a compelling financial and strategic transaction for our shareholders.”
In additional comments Roberts indicated Comcast would continue to buy back shares in the market out of operating cash flows in the future, by an additional US$10 billion after the close of the transaction.
He also stated Comcast thought that factoring in the claimed operational efficiencies from combining the companies, the adjusted purchase multiple may turn out to be approximately 6.7 x Operating Cash Flow and even accretive to earnings per share.
Robert D. Marcus, Chairman and CEO of Time Warner Cable must be happy to have escaped the clutches of Charter Communications whose lower bid has been on the table, and he commented on the deal, “This combination creates a company that delivers maximum value for our shareholders, enormous opportunities for our employees and a superior experience for our customers, ” adding …. “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.”
When they merge the back offices over time not everybody may be quite so pleased, but that is progress. The merger agreement between Comcast and Time Warner Cable remains subject to shareholder approval at both companies, and regulatory review and other customary conditions and if approved is expected to close by the end of 2014. It is also theoretically possible that Charter Communications might up its bid but that seems a little remote as they probably already would have done so if they could.
It will now be up to the regulatory authorities to insist on sufficient protections for consumers in the light of the potential creation of such a massive cable behemoth. It is likely that no huge objections are out there in principle or the deal may have de-railed earlier; however commitment to dispose of a fair number of their various cable assets – totaling more than 30 million subscribers – is likely on the cards.
A whole bunch of advisers have acted on the deal and will earn their enormous fees for sure with this one by the time it is all done and dusted. J.P. Morgan, Paul J. Taubman, and Barclays Plc acted as financial advisors to Comcast. Morgan Stanley, Allen & Company, Citigroup and Centerview Partners are financial advisors to Time Warner Cable and its Board of Directors – the latter being particularly in need of advice to independently ensure any price they ultimately endorse is fair to their shareholders..
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