Mega-deal: Charter to gobble up Time Warner Cable

Last Updated May 26, 2015 8:07 AM EDT

NEW YORK -- Charter Communications (CHTR) will spend $55.33 billion to acquire Time Warner Cable (TWC) in a cash-and-stock deal that would instantly create one of the largest pay-television and broadband operators in the U.S.

As part of the agreement, Charter will also buy Bright House Networks for more than $10 billion.

Charter will provide $100 in cash and shares of a new public parent company equal to 0.5409 shares of Charter for each outstanding share of Time Warner Cable, the nation's second-largest cable company. The transaction values each Time Warner Cable share at about $195.71.

The companies on Tuesday valued Time Warner Cable at a total of $78.7 billion.

"The combination of Charter, Time Warner Cable and Bright House will create a leading broadband services and technology company serving 23.9 million customers in 41 states," Charter said Tuesday.

"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, at highly competitive prices," Charter CEO Tom Rutledge said in a statement. "In addition, we will drive greater competition through further deployment of new competitive facilities-based WiFi networks in public places, and the expansion of the facilities footprint of optical networks to serve the large, small and medium sized business services marketplace."

Charter shares were up 4 percent, to $182.50, in pre-market trading. Time Warner shares rose 8.5 percent to $185.70.

Time Warner Cable was the target of a $45.2 billion bid from Comcast (CMCSA), the largest cable company. But the companies were forced to abandon the transaction in April after federal antitrust enforcers blocked the deal on grounds that it would reduce competition and hurt consumers.

Some analysts think Charter may face fewer regulatory challenges buying Time Warner Cable, noting that acquiring Time Warner Cable would have given Comcast a major competitive position in 19 of the 20 largest U.S. cities.

"We believe that a [Charter/Time Warner Cable/Bright House Networks] deal should be approved," said Jonathan Chaplin, an equity analyst with New Street Research, in a note. "The deal does not pose the same harm that [Comcast/Time Warner Cable] did."

Combined, Charter and Time Warner Cable would have 24 percent of the broadband market, one area of concern for regulators, compared with 57 percent in Comcast's tie-up with Time Warner Cable, Chaplin said.