Multiple analysts are now predicting that Charter's (NASDAQ: CHTR) proposed dual takeover of Time Warner Cable (NYSE: TWC) and Bright House Networks won't close until June, thanks largely to hang-ups with California regulators.
In an investor report released today, RBC Capital analyst Jonathan Atkin said that "state regulatory bodies are taking on more of an active role in the CHTR/TWC cable merger. In California, an administrative law judge decision is slated for May, with a vote slated for June 16, 2016. This delay of approximately two months vs. the original timeline reflects the (law judge) acceptance of public interest group arguments to introduce evidentiary hearings."
Atkin's report follows a memo released Friday by Jefferies analyst Mike McCormack, who said that Charter expects California regulators, including the state's Public Utilities Commission (PUC) "to use the opportunity to attempt to extract concessions, though this is not unexpected or new in the context of past deals."
Adding to the quorum, Macquarie Capital analyst Amy Yong also said Friday, "The deal needs approval from the California PUC. Despite already receiving approval from most states, Charter may have to wait longer for approval from California, which could push the closing back to as late as June."
Responding to the analysts' comments, Charter released this statement: "Charter's transactions with Time Warner Cable and Bright House Networks will deliver significant benefits to customers, current and future employees and shareholders. We continue to work with the CA PUC and their staff and remain confident we will obtain all of the approvals necessary for closing in due course."
Speaking at an investor event held two weeks ago by Charter's majority shareholder, Liberty Media, Charter President and CEO Tom Rutledge predicted a first-quarter closing for the deal.
"Everyone has had their say," Rutledge said. "The [FCC's] shot clock has stayed ticking as a result of our responsiveness so far. And there are very few local franchise authorities left for us to get clearance on. Our financing is done. We're sitting here, ready to close."
For his part, McCormack said that while Charter is facing far less headwinds than Comcast (NASDAQ: CMCSA) did when it tried to buy TWC a year ago, regulators will demand enough in the way of concessions to lengthen the review process into the middle of next year.
"The FCC's pleading cycle has concluded and commentary suggests a lot less industry opposition than the prior transaction," McCormack said. "We continue to believe the deal gets done and expect investors to reset expectations for a June 2016 closing."
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