Charter Communications is nearing acquisition of Time Warner Cable for approximately $55 billion.
The deal values Time Warner Cable at $195 per share.
This follows Comcast dropping its merger agreement with Time Warner Cable due to antitrust concerns.
The combined entity would control over 20% of the broadband market.
FCC Chairman suggests each deal will be evaluated on its own merits.
Opinion
The deal's ultimate impact hinges on regulatory approval, a significant hurdle given the concentrated market share and the fate of the Comcast merger. Charter's assumption of considerable debt raises concerns about its financial flexibility and long-term growth potential, particularly amidst evolving competition from over-the-top streaming services. The pressure to extract substantial synergies to justify the high valuation increases the operational risk. Regulators could impose conditions that undermine the value of the merger.
Core Sell Point
High regulatory risk and debt burden associated with the acquisition could negatively impact Charter's (and the merged entity's) long-term stock performance.
Time Warner Cable Inc is nearing an agreement to be acquired by smaller peer Charter Communications Inc for about $55 billion, combining the second and third largest U.S. cable operators, people familiar with the matter said on Monday.
A deal would create a major rival to Comcast Corp, the biggest operator in the U.S. cable and broadband market, and marks a triumph for Charter, which was rejected by Time Warner Cable just last year.
News of another potential merger comes as the traditional pay television industry faces stagnating growth and new competition from over-the-web rivals offering individual services, like Netflix, or packages of channels, such as Sony. A larger company in this sector could achieve greater economies of scale, including in negotiations with programmers.
The cash-and-stock deal values Time Warner Cable at $195 per share, according to sources, and comes just one month after Comcast dropped its $45.2 billion merger agreement with Time Warner Cable, clinched in February 2014, over antitrust concerns.
Time Warner Cable shares closed at $171.18 on Friday. That is up substantially from the day before the original Comcast deal was announced last year, when the shares closed at $135.31.
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.
