By Amol Sharma
Charter Communications Inc. is nearing an acquisition of Time
Warner Cable Inc. in a roughly $55 billion deal that would vault
the cable operator to the ranks of the biggest U.S. broadband and
pay television companies, creating a more potent rival for the
likes of Comcast Corp. and DirecTV.
The companies are in advanced talks for a cash-and-stock deal
that would value Time Warner Cable at $195 per share, according to
a person familiar with the matter. Charter would offer $100 per
share in cash and the rest in stock.
As part of the transaction, which could be announced as early as
Tuesday, Charter would also merge with small operator Bright House
Networks. The combined cable giant would have 23 million total
customers, second only to Comcast's 27 million among cable
operators.
News of the advanced deal talks comes only a month after Time
Warner Cable went back on the block when Comcast terminated the
companies' planned 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.
For Charter, which has 5.9 million residential subscribers in
more than 25 states and is backed by cable pioneer John Malone's
Liberty Broadband Corp., a union with Time Warner Cable would be
the culmination of two years of efforts to become a bigger U.S.
cable player and a catalyst for industry consolidation.
Charter 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., expected fights with TV channel
owners over which networks are worth keeping in the bundle, and the
reality of broadband regulations under new "net neutrality"
rules.
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.
This time, Charter took a more light-handed approach. Mr. Malone
got more involved, people familiar with the matter say, calling
Time Warner Cable Chief Executive Rob Marcus in the early stages of
Charter's pursuit to indicate he wanted a friendly deal. Charter's
camp made a point of not submitting a lowball bid that would put
off Time Warner Cable, the people said.
Still, competition threatened to once again derail the plans of
Charter and Mr. Malone: European telecommunications group Altice
SA, backed by French cable baron Patrick Drahi, was in hot pursuit
of Time Warner Cable in recent days. Mr. Drahi met with Mr. Marcus
on May 20 to discuss a potential cash-and-stock deal, The Wall
Street Journal reported. Altice last week announced it is acquiring
70% of U.S. midsize operator Suddenlink in a deal valued at $9.1
billion, signaling its U.S. ambitions.
Bloomberg earlier reported that Charter was nearing a deal for
Time Warner Cable and Bright House.
For Time Warner Cable, the pact with Charter continues a wild
ride over the past two years. The company was struggling last year
with video subscriber losses and other problems, when Comcast's
$45.2 billion buyout provided what looked like a good exit for
shareholders. Then the surprising turn of events in Washington left
the company in a lurch--only to result in what looks like another
deal in short order.
The backlash to Comcast's bid for Time Warner Cable at the
Federal Communications Commission and Department of Justice left
many cable executives and investors wondering whether any
transformational cable industry deal could withstand regulatory
review. FCC Chairman Tom Wheeler called cable executives including
Time Warner Cable's Mr. Marcus and Charter CEO Tom Rutledge in
recent days to convey that they shouldn't assume the agency is
against any and all future deals just because of what happened with
Comcast's.
Cable companies typically don't overlap geographically and
therefore don't compete head-to-head for broadband and cable
customers. But in reviewing the Comcast deal, regulators were
concerned about the implications of a company having too much
control in the broadband market.
A combined Comcast-TWC would have served about 35 million
residential and business Internet customers. It would have had at
least 57% of the market for broadband Internet service, defined by
the FCC as speeds 25 megabits-per-second and higher. A
Charter-TWC-Bright House combination would serve nearly 20 million
residential and business Internet customers.
Shalini Ramachandran contributed to this article
Write to Amol Sharma at amol.sharma@wsj.com
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