Comcast walks away from $45.2B deal for Time Warner Cable
Facing opposition from federal antitrust enforcers, Comcast (CMCSA) said Friday that it is ending its $45.2 billion bid for Time Warner Cable.
"Today, we move on," said Comcast CEO Brian Roberts in a statement issued before financial markets opened. "Of course, we would have liked to bring our great products to new cities, but we structured this deal so that if the government didn't agree, we could walk away."
Comcast, the nation's largest cable company as well as the top broadband provider, agreed to buy No. 2 Time Warner Cable (TWC) in early 2014 for $158.82 per share. But concerns that the merger, which would have given Comcast between 35 percent and 50 percent of the nation's broadband Internet market and 30 percent of the paid TV segment, could could run afoul of antitrust restrictions emerged quickly.
The companies faced critical regulators worried about the potential impact of the merger on consumers. The FCC planned to advise taking the deal to an administrative law judge for a hearing, sources told Reuters. Such cases can take months or even years to be resolved, an often fatal barrier for merging companies given the uncertainty that creates.
Officials from Comcast and Time Warner Cable held meetings on Wednesday with staff at the Federal Communications Commission and the Justice Department, which would have had to approve the deal. Although Comcast executives are said to have discussed potential remedies to the government's antitrust concerns, such as asset divestitures, regulators were skeptical.
Attorney General Eric Holder said the companies' decision to terminate the merger represents a victory for consumers, with the Justice Department on Friday saying that combining the cable titans would have created what it called an "unavoidable gatekeeper for Internet-based services."
"This is a victory not only for the Department of Justice, but also for providers of content and streaming services who work to bring innovative products to consumers across America and around the world," Holder said in a statement.
News that Comcast is abandoning the acquisition was first reported late Thursday by Bloomberg News.
"The handwriting has been on the wall the past several months," said Tuna Amobi, an analyst at S&P Capital IQ Equity Research, of the deal. "We always had doubts about such a mega-merger going through."
"It is one of those situations where the timing was far less than fortuitous with all of the noise going on in Washington and Comcast having a history with FCC," he added, referring to a controversial merger between Comcast and NBC Universal in 2011.
The FCC and Justice Department took more than a year to approve the merger between Comcast and NBC Universal. The agencies gave the green light only after imposing conditions intended to preserve competition from upstart video rivals. Comcast was required to relinquish management rights to Hulu, the popular video website co-owned by News Corp (NWS), Walt Disney (DIS) and NBC Universal.
"There are questions about whether Comcast held up to their side of the bargain," Amobi said.
Commenting on Comcast's and Time Warner Cable's move to end the deal, FCC Chairman Tom Wheeler said the tie-up would have threatened competition and chilled innovation, making it harder for online video providers to reach consumers.
The Justice Department's antitrust division has expressed concern that the Comcast-Time Warner Cable deal would give the merged company too much control over the broadband and pay-TV markets, potentially harming competition and raising prices for consumers.
The merger had also drawn fire from consumer advocates and lawmakers. Sen. Al Franken, D-Minn., claimed this week that the deal would create an industry "behemoth" that would drive up prices and reduce choice for consumers. He joined five other Democrats and Sen. Bernie Sanders, I-Vt., in urging regulators to halt the transaction.
Both companies argued that the merger would not harm consumers, citing growing competition from technology companies entering the telecommunications sector.
Comcast had no choice but to end its pursuit of Time Warner Cable, said Herbert Hovenkamp, a law professor at the University of Iowa, noting the hostile reception from regulatory agencies. "This game became too complex and too costly. They just decided it was time to pull the plug," he said.
If antitrust enforcers barred the way for Comcast and Time Warner Cable to complete the merger, that may not deter other cable players, such as Charter Communications (CHTR), from making a run. Charter bid for Time Warner Cable last year before Comcast lodged its offer.
"The irony here is that this may usher in a more rapid consolidation of the cable industry than we would have had the FCC and DOJ not opposed this deal," said Craig Moffett, an analyst at MoffettNathanson. "But instead of Comcast we'll have Charter leading the charge."
Time Warner Cable CEO Robert Marcus sought to put a positive spin on the merger coming apart.
"We are strong and getting stronger," he said in a statement Friday. "Throughout this process, we've been laser-focused on executing our operating plan and investing in our plant, products and people to deliver great experiences to our customers. Through our strong operational execution and smart capital allocation, we are confident we will continue to create significant value for shareholders."
Comcast shares rose 0.2 percent to $59.38 in early trade; Time Warner Cable's stock price was up $4.27, or 2.9 percent, to $153.03, a sign investors think the company may attract another suitor.
- With reporting from Jonathan Berr