Last Updated Feb 13, 2014 7:42 AM EST
Comcast Corp., the nation's largest cable TV company, agreed to buy No. 2 Time Warner Cable Inc. for about $45.2 billion in stock, or $158.82 per share, the two companies announced Thursday morning.
The deal was approved by the boards
of both companies and, pending regulatory approval, is expected to close by the
end of the year.
The deal would make Comcast, which also owns NBCUniversal, a dominant force in both creating and delivering entertainment to U.S. homes.
"The new cable company ... will generate multiple pro-consumer and pro-competitive benefits, including an accelerated deployment of existing and new innovative products and services for millions of customers," the companies said in announcing the deal.
The price is about 17 percent above Time Warner Cable shares' Wednesday closing price of $135.31 and trumps a proposal by Charter Communications Inc. to buy Time Warner for about $38 billion in cash and stock worth $132.50 per share.
Time Warner Cable shareholders will receive 2.57 Comcast shares for every Time Warner Cable share they own. Once the deal is final, they will end up owning about 23 percent of the combined company, one of the people said.
Charter had pursued Time Warner Cable for months but Time Warner Cable CEO Rob Marcus had consistently rejected what he called a lowball offer, saying he'd cut a deal for $160 per share in cash and stock. For a time, Comcast stayed in the background, waiting to purchase any chunk of subscribers that a combined Charter-Time Warner Cable would sell off.
Instead, Comcast now plans to divest 3 million pay TV subscribers after the deal closes. With 22 million of its own pay TV customers and Time Warner Cable's 11.2 million, the combined entity will end up with about 30 million subscribers when the deal is complete, a level believed not to trigger the concern of antitrust authorities. A formal cap was dissolved years ago by regulators, but divesting subscribers could help the deal get approved more quickly.
Comcast is taking the position that because Comcast and Time Warner Cable don't serve overlapping markets, their combination won't reduce competition for consumers, especially in the face of rivals AT&T and Verizon, which compete with the cable operators to provide both pay TV services and Internet hookups.
Comcast and Time Warner Cable are expected to save $1.5 billion in annual costs over three years, with half of that realized in the first year, one of the people said.
Comcast also plans to add an additional $10 billion in share buybacks at the close of the deal, on top of a recent plan to boost its share buyback authority to $7.5 billion from $1 billion, the person said.