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The proposed $45.2 billion Comcast-Time Warner Cable deal will create a colossus within the cable industry bound to fill both consumer groups and regulators with anxiety, but it's not as scary as it looks.
The announcement of the marriage between the nation's two largest cable companies came late Wednesday. The deal calls for Comcast Corp. (Nasdaq: CMCSA) to pay $158.82 per share for Time Warner Cable Inc. (NYSE: TWC) in an all-stock deal that represents a little more than a 17% premium over Wednesday's closing price of $135.31.
The deal also effectively put an end to a long-running attempt by Charter Communications Inc. (Nasdaq: CHTR) to acquire Time Warner Cable. Last month, Time Warner rejected an offer of $132.50 a share as "grossly inadequate."
There's no doubt the deal is a huge win for Comcast.
"This leaves Comcast as the sole king of the cable hill," Richard Greenfield, an analyst with BTIG LLC, told Bloomberg News. "This is a game changer for Comcast."
The new, bigger Comcast will have about one-third of all cable customers in the United States, making it far and away the largest cable operator.
Wary of the inevitable regulatory scrutiny from the Federal Communications Commission (FCC), Comcast has already announced that it will divest itself of 3 million subscribers. That will ultimately give it 30 million and put its share of the pay TV market at 30%.
Consumer activists vowed to fight the Comcast-Time Warner Cable deal.
"This deal would be a disaster for consumers and must be stopped," Craig Aaron, president of Free Press, a media watchdog, told the Los Angeles Times. Aaron called for the Department of Justice and FCC to block the merger.
But that almost surely will not happen. Not only does the Comcast-Time Warner Cable deal make sense for both companies, it makes sense for a cable industry that today is part of a far different competitive landscape than it faced 20 years ago, or even 10 years ago.
Here's why the regulators will have almost no choice but to approve this acquisition…
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.