Charter near $55B deal for Time Warner Cable

Charter Communications (CHTR) is nearing agreement to acquire Time Warner Cable (TWC) for $195 a share in a cash and stock deal valued at $55.1 billion, a person familiar with the talks said Monday.

The prospective combination of the nation's fourth- and second-largest cable companies could create a newly strengthened TV-and-Internet provider with operations in key U.S. markets, including New York and Los Angeles.

Coming just weeks after Comcast failed to buy Time Warner Cable, Charter is expected to pay $100 per share in cash and the balance in company stock, the person familiar with the talks said, speaking on condition of anonymity because the negotiations were confidential.

The offer represents a 13.9% premium to Time Warner Cable's $171.18 closing price in Friday trading, a historic high driven by investor expectation of a Charter deal.

Bright House Networks, a smaller cable company Charter said it would acquire in March as part of a separate $10.4 billion transaction, is also likely to be a part of the new deal, the person familiar with the talks said. The transaction could be announced as early as Tuesday, the person said.

If Charter can pull off buying both Time Warner Cable and Bright House, it'll become the second largest TV-and-Internet service provider in the U.S. with about 24 million customers nationwide. It'd trail only Comcast, which has about 27 million customers.

Charter did not immediately respond to a message seeking comment. Time Warner Cable, which was spun off from Time Warner in 2009, declined to comment.

Pay-TV providers have been consolidating in recent months as video streaming technology and high programming costs have driven cable and satellite companies to consider combining their operations to gain bargaining leverage against cable networks and broadcasters. Major video streaming service providers, such as Netflix and Amazon, also have grown their content and viewership in recent years and prompted millions of Americans to abandon pay-TV.

In April, Comcast ended its $45.2 billion pursuit of Time Warner Cable after federal regulators expressed anti-trust concerns and made moves that foreshadowed their likely rejection. AT&T has an agreement to buy DirecTV for $48.5 billion, a deal that analysts expect to be approved. Last week, Altice, the Luxembourg-based telecom company controlled by billionaire Patrick Drahi, said it's entering the U.S. market by buying cable operator Suddenlink Communications for about $9.1 billion.

Charter, controlled by prominent cable industry executive John Malone's Liberty Broadband, initially sought to buy Time Warner Cable in a series of escalating bids during 2013 to 2014. Time Warner Cable's board rejected Charter's sweetened offer of about $61 billion in cash, stock and debt assumption in January 2014.

The board characterized the offer as a "third grossly inadequate proposal," prompting Comcast to enter the bidding and trumping Charter with its offer.

Asked at an investor conference in November whether he would consider a new effort to buy Time Warner Cable if the Comcast deal were rejected, Malone replied, "Hell, yes."

If Charter's deal falls through, Time Warner Cable will receive $2 billion in breakup fee.

"We believe that this transaction will likely gain regulatory approval as there are materially lower market share issues," wrote Mike McCormack, an analyst at Jefferies, in an investor note. "The combined company is still smaller than (Comcast) and there are no vertical integration issues."