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The Charter-Bright House-Time Warner Cable Transaction: Synergies

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The Charter, Bright House, and Time Warner Cable transaction

According to Charter Communications (CHTR), a merger transaction of Charter, Time Warner Cable (TWC), and Bright House Networks was completed on May 18, 2016. The merged entity became the second biggest US cable player after Comcast (CMCSA). After the completion of the merger, during the MoffettNathanson Media & Communications Summit, Charter’s chairman of the board, CEO, and president Thomas M. Rutledge reiterated the expected annual transaction synergies from the third year of the merger.

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According to Rutledge, “we think the numbers that we said are correct.” He added, “When we think about synergies, so we had a synergy number that is immediate deal-related synergy, $800 million or so, I think it’s another – is that right? And half of it was programming and the other half is sort of executives and that kind of thing.” Additionally, during the company’s 1Q16 conference call, Chris Winfrey, Charter’s chief financial officer, stated that “we believe we will step into the Time Warner Cable rate card in the appropriate places effectively at close.”

Video base of the new Charter

The large video base of the new Charter may further help the company while negotiating with media networks for content costs. After the completion of the merger, Charter has the third-largest pay-TV base in the United States after AT&T (T) and Comcast. In July 2015, the acquisition of DIRECTV (DTV) added a significant pay-TV base to AT&T in the domestic market.

For a diversified exposure to some of the largest cable companies in the United States, you could consider investing in the SPDR S&P 500 ETF (SPY). The ETF held a total of ~0.88% in Comcast (CMCSA) and Cablevision Systems (CVC) as of May 25, 2016.

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