Charter Communications (CHTR, Financial) announced Tuesday that the company is acquiring Time Warner Cable (TWC, Financial) for $55 billion or nine times cash flow. This will be the largest acquisition on a price-to-cash-flow ratio the telecom industry has ever seen. When you include the debt from Time Warner that Charter is assuming, the deal is valued at $76 billion. When the deal is completed the new Charter will have 22 million consumers in 44 states and be the second largest TV and internet provider in the United States.
Details of the deal
STAMFORD, Conn., NEW YORK and SYRACUSE, N.Y., May 26, 2015 /PRNewswire/ -- Charter Communications, Inc. (Nasdaq: CHTR) (together with its subsidiaries "Charter") and Time Warner Cable Inc. (NYSE: TWC) today announced that they have entered into a definitive agreement for Charter to merge with Time Warner Cable. The deal values Time Warner Cable at$78.7 billion. Charter will provide $100.00 in cash and shares of a new public parent company ("New Charter") 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 will provide an election option for each Time Warner Cable stockholder, other than Liberty Broadband Corporation ("Liberty Broadband") or Liberty Interactive Corporation, who will receive all stock, to receive $115.00 of cash and New Charter shares equivalent to 0.4562 shares of CHTR for each Time Warner Cable share they own.
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Merger plan
Charter has agreed to pay $195/share for Time Warner in a cash-and-stock deal. The company will pay $100/share in cash to Time Warner shareholder, and the rest will be in Charter shares. Time Warner shareholders will get the option to receive $115/share in cash or shares in the new company. Charter will proceed with its earlier proposal to acquire Bright House Network for $10.4 billion. Once the three companies are integrated, Charter will become the second largest TV and internet provider in the United States.
"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 CEO Tom Rutledge said in a statement.
Funding for the deal
Funding for the deal will be provided by John Malone's Liberty Broadband that owns around 25% of Charter Communitcations. Liberty Broadband will buy $4.8 billion of the newly issued share from the New Charter after the deal closes, for a price of $176.95/share.
