The weekend's reports were confirmed, and Charter Communications announced today that it has entered into a definitive agreement to merge with Time Warner Cable Inc., in a deal values Time Warner Cable at $78.7 billion. Charter will provide $100.00 in cash and shares of a new public parent company equivalent to 0.5409 shares of CHTR for each Time Warner Cable share outstanding. The deal values each Time Warner Cable share at approximately $195.71 based on Charter's market closing price on May 20, or approximately $200 based on Charter's 60-trading day volume weighted average price.
In addition, Charter and Advance/Newhouse Partnership have amended their agreement which the two parties signed and announced on March 31, 2015, whereby Charter will acquire Bright House Networks for $10.4 billion. That agreement, as amended, provides for Charter and Advance/Newhouse to form a new partnership of which New Charter will own between approximately 86% and 87% and of which Advance/Newhouse will own between approximately 13% and 14%, depending on the Time Warner Cable shareholders' cash election option. The consideration to be paid to Advance/Newhouse by Charter will include common and convertible preferred units in the partnership, in addition to $2 billion in cash. Charter expects the transaction to close contemporaneously with the Charter-Time Warner Cable transaction.
Charter said it will form a new public company, New Charter.
Following the close of both the Charter-Time Warner Cable and the Charter-Advance/Newhouse transactions, Time Warner Cable shareholders, excluding Liberty Broadband and its affiliates, are expected to own between approximately 40% and 44%1 of New Charter, and Advance/Newhouse is expected to own between approximately 13% and 14% of New Charter. Liberty Broadband is expected to own between approximately 19% and 20% of New Charter.
The combination of Charter, Time Warner Cable and Bright House will create a broadband services and technology company serving 23.9 million customers in 41 states. The transactions will drive investment into the combined entity's broadband network, allow for wider deployment of new facilities based WiFi networks in public places, and the footprint expansion of optical networks to serve the large marketplace of small and medium sized businesses.
"The teams at Charter, Time Warner Cable and Bright House Networks are filled with the innovators of our industry. Representatives of each of these companies have invented some of the most revolutionary communications products ever created; innovations like video on demand, VOIP phone service, remote storage DVR, cable TV through an app, downloadable security and the first backward-compatible, cloud-based user interface," said Tom Rutledge, President and CEO of Charter Communications.
"With today's announcement, we have delivered on our commitment to maximizing shareholder value," said Robert D. Marcus, Chairman and CEO of Time Warner Cable. "This agreement recognizes the unique value of Time Warner Cable, and brings together three great companies that share a common philosophy of strong operations, great products, robust network investment and putting customers first. This combination will only accelerate the great operating momentum we've seen over the last year and provide enormous opportunities for our 55,000 dedicated employees. We remain wholly committed to bringing the very best experience to our residential and business customers coast to coast."
The three companies expect to close the transactions by the end of 2015.
Pay TV companies such as Time Warner Cable and Charter have been experiencing slowing growth over the years as customers access TV shows and movies over the Internet through services provided by Netflix Inc and Hulu. These traditional TV companies are now beefing up their fast-growing, higher-margin Internet businesses through consolidation and partnerships.
Charter's current bid is much higher than its first proposed deal, which Time Warner Cable rejected last year. It is also higher than the $45 billion offer Time Warner Cable had accepted from Comcast.