Charter, Time Warner Cable, and Bright House transaction
After the failed deal between Comcast (CMCSA) and Time Warner Cable (TWC), the largest US cable players—Charter (CHTR) and Time Warner Cable—announced that they signed a merger agreement on May 26, 2015. A press release stated that “The deal values Time Warner Cable at $78.7 billion.”
Charter also announced changes to its agreement with Advance/Newhouse for the $10.4 billion acquisition of Bright House to take into account the new Time Warner Cable deal. Regarding the timing of the proposed Charter, Time Warner Cable, and Bright House merger, the press release mentioned that “The three companies expect to close the announced transactions by the end of 2015.”
New Charter’s ownership structure
The proposed parent company of the Charter, Time Warner Cable, and Bright House merger is called “New Charter.” The deal gives Time Warner Cable’s shareholders two options.
They can either take $100 cash and New Charter shares worth 0.5409 of a Charter share for a Time Warner Cable share, or they can take $115 cash plus New Charter shares worth 0.4562 of a Charter share in New Charter for a Time Warner Cable share. These options aren’t for Liberty—it owns stake in Time Warner Cable. Liberty and Liberty Interactive will swap their Time Warner Cable stake for ownership in the proposed New Charter.
If Time Warner Cable shareholders, excluding Liberty, take the $100 cash option, they will own 44% of New Charter. Then Charter’s shareholders, excluding Liberty, will own 24% of the proposed new company. Also, Liberty and Advance/Newhouse will hold 19% and 13%, respectively, in the proposed New Charter.
However, if Time Warner Cable shareholders, excluding Liberty, take the $115 cash option, they will own 40% of New Charter. Then Charter’s shareholders, excluding Liberty, will own 26% of the proposed new company. Also, Liberty and Advance/Newhouse will hold 20% and 14%, respectively, in New Charter.
If you want to get diversified exposure to Time Warner Cable, you can invest in the Consumer Discretionary Select Sector SPDR Fund (XLY). XLY held ~1.9% in Time Warner Cable on April 30, 2015.
You can even get more diversified exposure to the company by investing in the SPDR S&P 500 ETF (SPY). SPY held ~0.2% in Time Warner Cable on the same date.