Charter Communications agreed today to buy rival Time Warner Cable for $56.7 billion in a deal that would transform the company into one of America’s largest cable and broadband operators.
The announcement represents the latest in a flurry of takeovers in the sector as companies struggle to keep pace with changes in how Americans watch and pay for television. As customers increasingly stream videos through the Internet, cable providers have sought deals to gain scale and greater bargaining power with content providers.
The multibillion-dollar offer also marks a culmination for Charter and its main backer, the 74-year-old billionaire media mogul John C. Malone, who will have transformed Charter from a small operator born in St. Louis in 1993 into the country’s second-largest cable company, behind Comcast.
Analysts said that Charter’s multibillion-dollar offer for Time Warner Cable highlighted the need for cable and broadband companies to join forces as the industry underwent its latest round of consolidation
“The timing of this deal clearly shows how desperate Time Warner Cable is to be acquired,” said Paolo Pescatore, an analyst with the technology research company CCS Insight. “A tie-up with another cable provider makes perfect sense given the altering landscape in the broadcast industry.”
Under the terms of the proposed deal, Charter offered investors in Time Warner Cable $195.71 for each share in the company in a cash-and-stock deal. That values Time Warner Cable at $78.7 billion, roughly 14 percent higher than its closing stock price on Friday. (American stock markets were closed for the Memorial Day holiday on Monday.)
If the deal is completed, the combined companies will be renamed New Charter.
Charter also confirmed on Tuesday that it would continue with its separate, cash-and-stock bid to acquire Bright House Networks, a smaller competitor, for $10.4 billion. The two acquisitions would approximately quadruple Charter’s base to about 24 million customers, compared with Comcast’s 27 million.
“With our larger reach, we will be able to accelerate the deployment of faster Internet speeds, state-of-the-art video experiences, and fully featured voice products, at highly competitive prices,” Charter’s chief executive, Thomas M. Rutledge, said on Tuesday in a statement. “The scale of New Charter positions us to deliver a communications future that will unleash the full power of the two-way, interactive cable network.”
As part of the deal, which is expected to close by the end of the year, Time Warner Cable shareholders will hold as much as 44 percent of the combined entity, according to the Charter statement. Investors in Advance/Newhouse, the parent company of Bright House Networks, will retain a stake of roughly 14 percent, and Liberty Broadband, which is owned by Mr. Malone, will hold a 20 percent stake.
Charter has long sought to acquire Time Warner Cable to gain market share in America’s fast-consolidating cable and broadband sector. Yet last year, that plan appeared to be thwarted by Comcast, which offered $45 billion to combine the country’s two largest cable operators.
The deal, however, broke down after regulators and competitors raised concerns that a combined Comcast-Time Warner Cable could lead to higher consumer prices and potential digital roadblocks for online video providers like Netflix.
Analysts said that Charter would probably face antitrust scrutiny before its deal with Time Warner Cable could be approved, though they said it was unlikely to face the same level of resistance as Comcast.
In part, that is because the combined Charter-Time Warner Cable would still be smaller than Comcast. The combined entity also would not own extensive media assets, as Comcast does through its NBC Universal division. The two cable providers already offer similar cable and broadband services in a number of states, including California, Texas and Virginia.
