New York: Comcast Corp offered to sell 1.4 million pay TV subscribers to Charter Communications Inc for $7.3bn as part of a transaction aimed at winning regulatory approval for its proposed $45bn takeover of Time Warner Cable.
Comcast also said it would divest another 2.5 million subscribers into a new publicly traded company, dubbed SpinCo for now, to be one-third owned by Charter and two-thirds by Comcast shareholders. The deal would make Charter — whose own bid for Time Warner Cable was thwarted by Comcast’s higher offer — the second-biggest US pay TV company with 5.7 million customers, overtaking Cox Communications Inc.
Charter’s shares rose as much as 10 percent to $142.70 in early trading yesterday. Comcast shares were up 1.4 percent at $51.70.
Comcast would have less than 30 percent of the US residential cable or satellite TV market after the deal, the company said in a statement. The agreement is contingent on Comcast’s Time Warner Cable deal being approved by the Justice Department and the US Federal Communications Commission, a process that could take many months.
Analysts said the deal was a pre-emptive move by Comcast ahead of a review of the deal by regulators. “Comcast wanted to do this deal now with Charter so it could get in front of regulators at the Justice Department and the FCC at the same time as the Time Warner Cable deal,” a source familiar with the matter said.
The source said there was a standstill agreement with Charter stipulating that it cannot gain full control of SpinCo for four years. Comcast will have no ownership in SpinCo.
SpinCo would have an estimated enterprise value of $14.3bn and an equity value of $5.8bn, Charter and Comcast said in an investor presentation.
The divestments, mostly in the US Midwest, would deliver about $19.5bn in value to Comcast shareholders, the companies said.
“For Charter, this deal is a transformative event and sets them up over time to consolidate the balance of the rest of the cable industry,” Pivotal Research Group analyst Jeff Wlodarczak said, adding that the deal was good for both parties. Reuters
