By Geoffrey Smith
May 26, 2015

Charter Communications Inc (CHTR) said it would buy Time Warner Cable Inc (TWC) in a $55 billion effort to take on No. 1 U.S. cable services provider Comcast Corp (CMCSA).

Including debt, the deal values Time Warner Cable at $78.7 billion.

Charter will pay around half the total sum in cash, with the rest coming in the form of newly-issued shares. The deal values Time Warner Cable at around $200 per share, based on the average-weighted price of Charter’s share price over the last six months. That’s a hefty premium to where TWC has traded recently. It had closed last Monday at $158, before hints and leaks of a deal with Charter started to emerge.

This is Charter’s second run at Time Warner Cable. The fourth-largest U.S. cable operator tried to acquire its larger competitor last year, but Comcast made a better offer. That deal later expired due to fears of regulatory problems for Comcast if it went ahead with the acquisition. This time, Charter reportedly went up against France’s Altice SA.

Charter said it will allow TWC’s shareholders to choose between the half-and-half offer and an alternative which would see them get $115 in cash for each share and a smaller amount in stock. That option isn’t open to TWC’s biggest shareholder, Liberty Broadband and its affiliates, which will receive all stock.

In a related issue, Charter is also amending the terms of the $10 billion deal it agreed in March with Advance/Newhouse to buy Bright House Networks. The three-way combination between Charter, TWC and Bright House will create a company with nearly 24 million customers in 41 states.

Under the terms of the deal outlined Monday, TWC shareholders will end up with a stake of between 40% and 44% in the new company (of which Liberty will end up with 19%-20%), while Advance/Newhouse will end up with a state of between 13%-14%.

Charter’s CEO Tom Rutledge will take over as CEO of the combined entity.

The companies were quick to promise “faster broadband speeds, better video products, including more high definition channels, more affordable phone service and more competition, for consumers and businesses.”

They also pledged more product innovation and “investment in insourcing and returning offshore jobs to America.”

 

UPDATE: This article has been updated to clarify that the the $78.7 billion price tag for TWC includes the value of its debt.

 

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