Comcast Corporation (Nasdaq: CMSCA), the largest U.S. cable company, plans to acquire No. 2 rival Time Warner Cable Inc. (NYSE:TWC), boosting its net subscriber base by some 8 million in an all-stock deal worth $45.2 billion, the companies said Thursday.
Philadelphia-based Comcast will buy all Time Warner Cable's 284.9 million shares at a price of 2.875 shares of Comcast for each Time Warner Cable share. Based on Wednesday closing share prices, the transaction values Time Warner Cable shares at $158.82 each. In early trading, shares of Comcast were down slightly less than 4 percent while Time Warner Cable shares were up roughly 7 percent to more than $135.
Upon completion, expected by yearend, the deal will leave current Time Warner Cable shareholders as 23 percent owners of the combined entity.
Comcast will acquire Time Warner Cable's approximately 11 million managed subscribers but will divest 3 million of its U.S. subscribers as part of the deal.
The combination will create $1.5 billion in operating efficiences, Comcast said, with 50 percent of those synergies expected in the first year.
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Despite those efficiencies, any deal is subject to regulator approval - and the proposed deal is already raising concern that the new super-company would have too large a market share. That very large market share that would likely lead to substantially higher prices for services becuase of lack of meaningful competition in the markets served.
"We believe there are meaningful operational efficiencies and the adjusted purchase multiple is approximately 6.7x Operating Cash Flow," Comcast said in a statement. "This transaction will be accretive and will yield many synergies and benefits in the years ahead."
Comcast also said it will expand its buyback program by an additional $10 billion.