Federal Communications Commission (FCC) has initiated its review of Charter Communications, Inc.’s CHTR proposed acquisitions of Bright House Networks and Time Warner Cable Inc. TWC – the second-largest cable multi service operator (MSO) in the U.S.
In the previous month, Charter had made two major announcements pertaining to the pending deals. The company reached an agreement to buy Time Warner Cable for a total value $78.7 billion, including debt. Taking into account Time Warner Cable's outstanding diluted shares as of Mar 31, the value of the stock portion of the deal has been pegged at $55.76 billion. Moreover, as per the latest quarterly report, Time Warner Cable has long-term debt of $22.64 billion.
Also, Charter has announced its decision to acquire Bright House – the sixth largest U.S. cable operator – for $10.4 billion.
All eyes are glued on the final outcome of the FCC review. Previously, the FCC had disapproved Comcast Corporation’s CMCSA attempt to take over Time Warner Cable as the combined entity would have controlled 35% of the U.S. pay-TV market and almost 60% of the high-speed broadband (Internet) market.
After the termination of the Comcast-Time Warner Cable deal, many cable executives opined that mergers between cable companies may not be possible in the future. However, Tom Wheeler, the FCC Chairman stated that the agency is not against merger activity in the cable industry.
However, the Charter-Time Warner Cable deal may face close scrutiny by the FCC. Together, the merged entity of Charter, Time Warner Cable and Bright House will serve 23.9 million customers across 41 states. However, the figure will be below the FCC’s 30% market share.
Charter carries a Zacks Rank #3 (Hold). A better-ranked stock in this sector is AMC Networks Inc. AMCX with a Zacks Rank #1 (Strong Buy).
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