By Jason Galanis
Charter Communications is nearing an offer to buy Time Warner Cable for around $55 billion. This will merge the second and third largest cable companies in the United States. This could be a concern to a major industry rival, Comcast Corp. Comcast is the largest U.S. cable company. The larger company could achieve economies of scale and pose a major threat to Comcast.
Time Warner is valued at $195 per share in the deal. Comcast had been trying to acquire Time Warner, but dropped the 45.2 billion agreement last month. Friday the shares of Time Warmer closed at $171.18. Time Warner shares had been trading at around $135 a share before the Comcast deal was announced. Regulators did not allow the Time Warner Comcast merger because it would have created a cable company with 40 percent of the U.S. market. The merger between Charter and Time Warner would create a company that has 20 percent of the market.
Charter Communications is on the acquisition bandwagon. They will acquire Bright House Networks, for 10.4 billion. With Time Warner and Bright House, Charter could have 23 million customers. Comcast has 27.2 customers. That is what Comcast is concerned about. They could soon lose their position as the largest cable company in the United States. Tom Rutledge, Charter’s Executive will be the CEO of the new company.
Time Warner has been a takeover target before. There may still be companies interested in bidding for Time Warner, but those in the know, claim the deal between Charter and Time Warner is done. It is reported that if the deal falls through though, Time Warner will receive a $2 billion break-up fee. The outcome of the news could unfold as early as Tuesday morning.