Charter Communications Inc. (CHTR) has offered a fresh bid to acquire Time Warner Cable Inc. (TWC), yesterday. The company offered $132.50 per share of Time Warner Cable, including $83 in cash and $49.50 in Charter stock.
The total size of the deal is approximately $61.3 billion. Excluding debt, the deal size is around $37.3 billion. The existing Time Warner Cable stockholders will get 45% control of the merged entity.
However, the board of directors of Time Warner Cable unanimously rejected the offer from Charter on grounds of inadequacy. This is the third rejection in the last one year. Time Warner Cable intends to thoroughly evaluate whether the deal will add sufficient value to its investors before finalizing.
Several industry researchers have estimated that the offer size may go up to $160-$162 per share. Nevertheless, Charter has decided to take the deal directly to Time Warner Cable shareholders.
The news of a proposed merger between Charter Communications and Time Warner Cable first surfaced after Liberty Media acquired a 27.3% stake in the former. Liberty Media is aggressively pursuing the idea of Charter Communications acquiring a major cable TV operator in the U.S. such as Time Warner Cable.
Meanwhile, Comcast Corp. (CMCSA), Cox Communications and several private equity firms are also reported to be exploring strategic options to acquire Time Warner Cable.
Time Warner Cable and Charter Communications currently are the second and the fourth largest cable TV operators in the U.S., respectively. A merger between the two companies will create a formidable player in the industry with nearly 20 million subscribers across 38 states. The combined entity will be the third largest pay-TV service provider in the U.S. after Comcast and DIRECTV (DTV).
Currently, Time Warner Cable carries a Zacks Rank #1 (Strong Buy) and Comcast carries a Zacks Rank #2 (Buy), while both Charter Communications and DIRECTV have a Zacks Rank #3 (Hold).
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