The merger of Charter Communications, Bright House Networks, and Time Warner Cable
The merger of Charter Communications (CHTR), Time Warner Cable (TWC), and Bright House Networks was completed on May 18, 2016, according to Charter Communications. With this merger, the new Charter Communications is the second largest US cable player after Comcast (CMCSA).
As of the end of 2015, the combined entity would have had ~25.1 million customer relationships and ~48.4 million passings, per Charter Communications. Moreover, the combined footprint was present in nine out of the top 25 designated market areas. Charter Communications plans to increase product penetration levels for the combined entity, which should boost its unit revenue per household.
Pricing details of the merger
According to Charter Communications in April 2016, the transaction value of Time Warner Cable was ~$80.9 billion based on certain assumptions, including Charter Communications’ closing price on March 18, 2016. Another assumption is that Time Warner Cable’s shareholders would choose option A. In option A, TWC shareholders, excluding Liberty Broadband and Liberty Interactive, get $100 as well as shares of the new company worth 0.54 shares of legacy Charter. In option B, TWC shareholders, excluding Liberty Broadband and Liberty Interactive, get $115 and shares of the new company worth 0.46 shares of legacy Charter.
According to Charter Communications, “Out of the approximately 285 million shares of TWC common stock outstanding as of the Election Deadline, approximately 173 million shares made a valid election, of which approximately 170 million shares elected to receive the Option A consideration and approximately 3 million shares elected to receive the Option B consideration. All shares as to which no election was made at or prior to the Election Deadline have, by default, been converted into the right to receive the Option A consideration.”
According to Charter Communications in April 2016, the transaction value of Bright House Networks was ~$11.4 billion.
For diversified exposure to some of the largest US cable companies, you might consider investing in the SPDR S&P 500 ETF (SPY). SPY held a total of ~0.87% of its holdings in Comcast (CMCSA) and Cablevision Systems (CVC) on May 17, 2016.
In the next part of this series, we’ll look at some of the changes for Time Warner Cable after the merger.