Charter Communications (NASDAQ: CHTR) is reportedly in line to get 1.5 million Comcast subscribers and a stake in a newly formed company that Comcast (NASDAQ: CMCSA) would spin off if it acquires Time Warner Cable (NYSE: TWC).
People familiar with the situation told Bloomberg that Charter would pay about $20 billion for the subs and would get an equity stake of less than 50 percent in the newly formed company. An agreement could be announced publicly "as soon as this week," the sources said.
Comcast has said it would divest about 3 million subscribers as part of its $45.2 billion acquisition bid for Time Warner Cable. Company executives, however, offered scant details on how many subs would go and who would get them during a first quarter earnings conference call.
CFO Michael Angelakis, prefacing his remarks by saying "we do not comment on rumors," explained the groundwork that would be involved in divesting subscribers.
"There are a number of potential structures for us to evaluate," Angelakis said during prepared comments to analysts. "Some key considerations include … our ability to divest subscribers in the most tax-efficient way possible; our ability to shrink our equity base and/or deliver cash to our shareholders; and our ability to maximize our presence in our most strategic markets."
Any divestiture, he added, would need to be "leverage neutral" so that cash proceeds can be used for return of capital to Comcast shareholders.
"This is complex and we believe value-enhancing to our shareholders," Angelakis continued. "There is a lot of work to be done in addition to the integration effort and we will provide regular updates as we continue to refine our thinking and analysis."
According to those talking to Bloomberg, most of that work has been accomplished in a deal that would allow Comcast and Charter to enhance their presence in certain markets such as Los Angeles, where Charter would swap 275,000 subscribers to Comcast, making it the region's sole MSO when it acquired Time Warner Cable. Charter would also have influence over the management of the new company.
Spokesmen for both Comcast and Charter declined to comment to Bloomberg on the story.
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