Cable television giant, Comcast, has announced plans to buy its biggest competitor, Time Warner Cable. In the all-stock deal Comcast would pay Time Warner $159 per share, an 18 percent premium on Wednesday’s closing price.
The friendly takeover, a $45.2 billion transaction, would combine the customer base of the two companies, transforming Comcast into a 30 million customer behemoth. That would be a distinct advantage over satellite provider DirecTv’s customer base, which totals 20 million. The next largest cable provider in the country would be Cox Cable with 4.6 million subscribers.
The merger of the two companies could raise hackles of anti-trust regulators in Washington.
"A deal may face a fierce battle in Washington as you are merging the two largest cable operators," said analyst Tony Wible, of brokerage firm Janney Montgomery Scott, in a research note.
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He noted that since the two companies do not directly compete they could actually reduce costs to consumers through the deal, but ”the government could still object and may be more concerned about one company controlling so much of the country's broadband infrastructure.”
Time Warner officials also said the deal would benefit consumers.
“On a personal level, it’s never easy to cede control of a company,” said Time Warner chief executive, Rob Marcus. “However in this case, it just makes too much sense.”
Comcast has announced that it would purge approximately 3 million current subscribers in a gesture aimed to alleviate some anti-trust concerns. The company has also said the deal will ultimately benefit end-users by driving down costs and speeding up the release of new cloud-based technology set-top boxes. The merger will eventually increase broadband speeds they say.
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The announcement will likely bring an end to Charter Communication’s ongoing attempt to acquire Time Warner. Charter, though, may stand to acquire some assets divested as part of the deal.
If approved by the shareholders of both companies, the purchase will be the second time in a little over a year that Comcast has shaken up the country’s media landscape. They completed a $17 billion acquisition of NBC Universal in early 2013.