Charter Communications is close to acquiring Time Warner Cable for $195 a share in a cash and stock deal that is valued at $55.1 billion, sources confirmed on Monday.
According to USA Today, the merger of the country’s fourth largest and second largest companies could create stiff competition for traditional pay TV providers like Comcast and DirecTV. Video streaming services provided by other companies such as Netflix also have escalated their business and viewership in the last few years.
Charter will be paying $100 per share in cash and balance in company stock.
Charter initially offered to acquire Time Warner via bidding in 2013-2014. However, Time Warner rejected the offer, which stood at approximately $61 billion in cash, stock and debt assumption in January 2014, with the board saying the offer was a “third grossly inadequate proposal.”
Comcast then arrived at the scene and made an offer to acquire Time Warner for $45 billion. The offer was eventually revoked owing to intense scrutiny from regulators, according to The New York Times.
The Times’ Michael J. de la Merced wrote, “Since the collapse of the Comcast agreement, Charter has worked to win over its onetime reluctant target, focusing on a friendly deal and acknowledging that it would have to pay a much higher price tag,” something which may be attributed to the competition Charter received from French billionaire Patrick Drahi’s Altice SA.
According to Craig Moffett, an analyst at MoffettNathanson in New York, “The idea that Time Warner Cable and Charter are merging isn’t a surprise, but the price raises some eyebrows.
“Altice undoubtedly contributed to Charter having to pay such a steep price to close the deal.”
Bright House Networks is also expected to participate in the $55 billion deal.
The proposed purchase price of $195 a share has been calculated to be 14 percent more than the closing stock price of Time Warner, which is valued at present at $48.4 billion, on Friday.
With the merger, the new entity will be the second largest cable company in the United States. Over 20 million subscribers would fall under the umbrella of the unified cable giant.
The Comcast-Time Warner deal, on the other hand, would have yielded just under 30 million subscribers, and the ability to amount up to 30% to 50% of the nation’s broadband users, according to Toronto Sun.
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