A man cycles past the Comcast headquarters in Philadelphia, Pennsylvania. Comcast unveiled plans yesterday to takeover Time Warner Cable for $45.2bn in a deal merging the two largest US cable operators.


AFP/New York


Comcast unveiled plans yesterday to swallow up Time Warner Cable for $45.2bn in a deal merging the two largest US cable operators and boosting the power of the media-entertainment conglomerate.
The news quickly raised concerns about the reach of Comcast, which owns NBCUniversal’s film and television assets and is one of the largest providers of Internet service via cable.
A joint statement said the all-stock merger “will create a leading technology and innovation company, differentiated by its ability to deliver ground-breaking products on a superior network while leveraging a national platform to create operating efficiencies and economies of scale.”
Comcast chairman and chief executive Brian Roberts said: “In addition to creating a world-class company, this is a compelling financial and strategic transaction for our shareholders.”
Roberts said the plan would allow Comcast to deploy new technologies for delivering streaming content and use the Internet cloud with greater efficiency.
The joint announcement of the friendly merger marks Comcast’s triumph over its rival for the deal, the nation’s fourth largest cable operator Charter Communications, and its biggest shareholder, Liberty Media Corp.
The deal amounts to $158.82 per share, about $23 a share above where TWC has been trading and comfortably above Charter’s offer of $132.50 a share, which was rejected as too low.
Comcast was already the dominant force with nearly 22mn video subscribers, compared to 12mn for Time Warner Cable, which was spun off as an independent company in 2009 from the Time Warner media-entertainment conglomerate.
The companies said the merger agreement is subject to shareholder approval at both companies and regulatory review. But the news immediately raised concerns about the creation of a dominant force which spans cable, Internet and the content flowing over the networks.
John Bergmayer at the consumer activist group Public Knowledge urged regulators to block the deal.
“Comcast cannot be allowed to purchase Time Warner Cable. Antitrust authorities and the FCC (Federal Communications Commission) must stop it,” Bergmayer said in a statement.
“If Comcast takes over Time Warner Cable, it would yield unprecedented gatekeeper power in several important markets. It is already the nation’s largest ISP, the nation’s largest video provider, and the nation’s largest home phone provider. It also controls a movie studio, broadcast network, and many popular cable channels.”
He said that the enlarged Comcast “would be the bully in the schoolyard, able to dictate terms to content creators, Internet companies, other communications networks that must interconnect with it, and distributors who must access its content.”
Craig Aaron at the advocacy group Free Press raised similar concerns, saying the deal would give Comcast a dominant share of the US pay-TV market and “triple-play” market for video, voice and Internet service.
“Comcast will have unprecedented market power over consumers and an unprecedented ability to exert its influence over any channels or businesses that want to reach Comcast’s customers,” Aaron said.
“Americans already hate dealing with the cable guy... But this deal would be the cable guy on steroids — pumped up, unstoppable and grasping for your wallet.”
Comcast said that in order to address competition concerns, it is prepared to divest systems serving about three million subscribers, leaving a net gain of approximately eight million.
That would bring Comcast’s managed subscriber total to roughly 30mn, the company said.
Other analysts said regulators may approve the deal but possibly impose conditions. “While we see no fundamental barrier to deal approval, conditions may be placed on the combined company to amplify and extend the types of conditions that were placed on the Comcast-NBCU deal in 2010 aimed at fostering online and video competition,” said RBC Capital Markets analyst Jonathan Atkin.
Mike McCormack at Jefferies said the divestment of some cable operations “should alleviate some concerns” by regulators.

Banks set to earn $143mn in deal fees

Comcast Corp’s proposed $45.2bn merger with Time Warner Cable would generate as much as $143mn in investment banking fees, providing a rare boon to Wall Street banks grappling with a dearth of large corporate takeovers.
JPMorgan Chase & Co, former top Morgan Stanley banker Paul Taubman and Barclays, which together advised Comcast, would split an estimated $51mn to $68mn in advisory fees if the proposed deal goes through, according to estimates by Freeman & Co.
Financial advisers to Time Warner Cable — Morgan Stanley, Allen & Company, Citigroup and Centerview Partners — are set to share $57mn to $75mn in fees, the estimates show.
However, a number of other banks backing a rival bidder, Charter Communications, would likely miss out on the several hundred millions of dollars in potential fees.
Because Charter’s cash and stock offer for Time Warner Cable, unlike Comcast’s all-stock bid, involved a large borrowing, banks advising Charter could have earned more than $500mn in advisory and financing fees, according to Freeman & Co estimates in January. Charter, which made a hostile $37.3bn bid for Time Warner Cable, was working with Goldman Sachs Group, LionTree, Guggenheim Securities, Bank of America Merrill Lynch, Credit Suisse Group and Deutsche Bank.
The proposed combination between Comcast and Time Warner Cable is this year’s biggest transaction globally, and the largest since Verizon Communications’ $130bn deal last year to buy out Vodafone Group Plc’s stake in Verizon Wireless.
The deal is also yet another coup for Paul Taubman, who is advising key corporate clients on his own after leaving Morgan Stanley in early 2013. The former co-head of Morgan Stanley’s institutional securities unit left the Wall Street firm after it became clear that chief executive James Gorman planned to choose his long-time rival Colm Kelleher as the sole head of the unit.
Taubman was the No 13 mergers adviser in 2013 globally thanks to his role advising Verizon on the buyout of the Verizon Wireless stake, putting him ahead of entire banks such as Evercore Partners, Moelis & Co and Jefferies in the coveted league table of financial advisers.