Coverage: Charter near deal for Time Warner Cable

We’ve seen this offer before. Charter is trying to purchase Time Warner Cable – this time for $55 billion. The real question is what is different this time that will make it go through.

Bloomberg had these details about the second deal in a story by Alex Sherman and Ed Hammond:

Charter Communications Inc. is near an agreement to buy Time Warner Cable Inc. for about $55.1 billion in cash and stock, according to people familiar with the matter.

Charter will pay about $195 a share — 14 percent above Time Warner Cable’s closing price on May 22 — with $100 in cash and the rest in its own stock, said the people, who asked not to be identified because the talks are confidential. The deal could be announced as soon as tomorrow, they said. Bright House Networks, a smaller cable company that Charter is trying to buy, will also be merged into the combined entity, they said.

Charter, the fourth-biggest U.S. cable company, is making its second move on No. 2 Time Warner Cable after its early 2014 bid was rejected and Comcast Corp. swooped in with a competing offer. Charter and its biggest shareholder, billionaire John Malone, got another shot when the Comcast deal fell apart in April because of regulatory scrutiny. They also faced last-minute competition from French billionaire Patrick Drahi’s Altice SA, which held merger talks with Time Warner Cable over the past days.

The Wall Street Journal story by Sarah Rabil, Joe Flint and Amol Sharma said that Charter would merger another operator and become the second-largest cable provider if the deal is finalized:

As part of the transaction, which could be announced as early as Tuesday, Charter would also merge with small operator Bright House Networks, said people familiar with the deals. The combined cable giant would have 23 million total customers, second only to Comcast’s 27 million among cable operators.

News of the deal talks comes only a month after Time Warner Cable went back on the block after Comcast terminated the companies’ planned $45.2 billion merger in the face of serious pushback from Washington regulators. A Charter-TWC deal could be in for a stringent review in Washington as well, some analysts have said.

Charter, which has 5.9 million residential subscribers in more than 25 states, and Mr. Malone are betting that increased scale will help the company navigate the industry’s choppy waters. Operators must contend with the onset of cable “cord-cutting” as frustrated consumers drop connections, the rise of streaming-video competitors from Netflix Inc. to Apple Inc. and expected fights with TV-channel owners over which networks are worth keeping in a bundle.

Michael J. de la Merced wrote for The New York Times that companies are trying to best position themselves as the way people watch TV changes:

The flurry of deal-making reflects the efforts of an industry grappling with a tectonic shift in how Americans watch and pay for television. With customers increasingly turning to the Internet for videos, cable companies have sought to combine to gain bigger scale and leverage in negotiations with content providers.

That has often meant strikingly huge acquisitions. In the last week alone, the European telecom giant Altice bought a controlling stake in the small cable operator Suddenlink to extend its broadband and pay television empire across the Atlantic as part of a campaign that may eventually extend to buying other smaller cable operators.

Time Warner Cable, spun off from the parent it was named after in 2009, is the No. 2 cable operator in the country and has long been viewed as an important trophy for any company looking to dominate the American cable and broadband landscape.

Buying Time Warner Cable, as well as Bright House, will transform Charter — a small operator born in St. Louis in 1993 — into the most serious competitor to Comcast to date. The two acquisitions will approximately quadruple Charter’s customer base to about 24 million, compared with Comcast’s 27 million.

Charter is hoping that regulators will look more favorably on the deal this time, Liana B. Baker and Greg Roumeliotis wrote for Reuters:

A merger of Charter and Time Warner Cable, with other related deals, would eliminate one of the country’s top Internet providers and control more than 20 percent of the broadband market, according to data from MoffettNathanson.

The Comcast-Time Warner Cable deal rejected by regulators would have created a provider with roughly 40 percent of the U.S. high-speed Internet market.

Charter hopes its deal for Time Warner Cable will be viewed more favorably by regulators. Federal Communications Commission Chairman Tom Wheeler reached out to the chief executives of the two companies last week to convey that the agency is not opposed to any and all cable deals, The Wall Street Journal reported. Any deal would be considered on its own merits, the paper quoted Wheeler as saying.

One of the chief areas of concern for regulators in a merging industry is competition in Internet broadband.

Charter is hoping that by getting bigger, they’ll be better able to compete in a consolidated market. It will be up to regulators to determine if the combined company will be a service or hindrance to competition.