Charter Communications (NASDAQ:CHTR) agreed to buy its much larger competitor Time Warner Cable (NYSE:TWC) for $56.7 billion, in a deal that would transform the company into one of America’s largest cable and broadband operators and to better compete against market leader Comcast (NASDAQ:CMCSA).
Charter, in which billionaire industry legend John Malone-chaired Liberty Broadband Corp owns about 26 percent, is offering about $195.71 in cash-and-stock for each Time Warner Cable share, based on Charter's closing price on May 20, the companies said in a statement today.
Including debt, the deal values Time Warner Cable at $78.7 billion. Liberty Broadband is expected to own about 20 percent of the new company.
Charter also will provide Time Warner Cable shareholders an option to receive $115 in cash and shares of the new company.
"With our larger reach, we will be able to accelerate the deployment of faster Internet speeds, state-of-the-art video experiences, and fully–featured voice products," Charter chief executive officer Tom Rutledge said in a statement.
The Federal Communications Commission immediately served notice that it would closely scrutinize the deal, focusing not only on absence of harm but benefits to the public. The FCC was unusually quick to comment on the latest deal.
"The Commission will look to see how American consumers would benefit if the deal were to be approved," Chairman Tom Wheeler said in a statement. "In applying the public interest test, an absence of harm is not sufficient."
Shares of Charter were up 0.9 percent at $176.62 at 9:47 a.m. in New York, while shares of Time Warner rose to 4.3 percent to $178.56.
A merger of Charter and Time Warner Cable, with other related deals, would create a company that controls more than 20 percent of the U.S. broadband market, according to research firm MoffettNathanson.
Charter also announced it would acquire Bright House Networks, the sixth-largest U.S. cable company, for $10.4 billion. The combined companies could have as many as 23 million total customers, just behind Comcast's 27.2 million customers.
The deal comes a month after Comcast abandoned a plan to buy Time Warner Cable after heavy pressure from regulators. The price Charter will pay represents a 23-percent premium over the Comcast deal.
In 2013, Charter made multiple offers to buy Time Warner Cable but was rebuffed. Its efforts culminated in a hostile bid early last year that was headed off when Comcast struck its ill-fated TWC deal.
Time Warner Cable reported a 3.5 percent rise in revenue as it added more residential video and high-speed data subscribers than expected in its latest quarterly report. It also added a net 30,000 residential video customers in the first quarter.
U.S. cable and internet companies are facing stiff competitive pressure and are trying to cut costs and attract new customers as users increasingly choose to stream viewing content on the internet at a time of their choosing.
The companies expect to close all the deals by the end of 2015.