Charter Communications Inc. is near an agreement to buy Time Warner Cable Inc. for about $55.1 billion in cash and stock, according to people familiar with the matter.
Charter will pay about $195 a share, with $100 in cash and the rest in its own stock, said the people, who asked not to be identified because the talks are confidential. The deal could be announced as soon as Tuesday, they said. Bright House Networks, a smaller cable company that Charter is trying to buy, will also be merged into the combined entity, they said.
Charter, the fourth-biggest U.S. cable company, is making its second move on No. 2 Time Warner Cable after its early 2014 bid was rejected and Comcast Corp. swooped in with a competing offer. Charter, whose largest shareholder is billionaire John Malone, got another shot when the Comcast deal fell apart in April because of regulatory scrutiny.
Spokespeople for Charter and Time Warner Cable declined to comment.
The price is 14 percent above Time Warner Cable's closing price on May 22. Shareholders will have the option to accept as much as $115 a share in cash and less Charter stock, the people said. The deal value of $55.1 billion is for Time Warner's equity. Charter also will assume debt in the transaction.
Dealmaking is heating up in an industry facing waning demand for traditional pay-TV packages and competition from Netflix, Amazon and other online services. While many analysts predicted a tie-up between Charter andTime Warner Cable, French cable billionaire Patrick Drahi made a surprise entry in the U.S. market on May 20 by agreeing to buy a smaller rival. While in the country, he also met with Time Warner Cable Chief Executive Officer Rob Marcus, according to a person with knowledge of the matter.
Liberty Broadband Corp., the Malone entity that holds the stake in Charter as well as shares of Time Warner Cable, will buy $5 billion of new Charter stock at the current price to help fund the deal, said the people. The transaction also has a breakup fee of $2 billion, which anticipates a possible bid by Drahi's Altice and antitrust concerns, they said.
The Time Warner Cable deal enables Charter to almost quadruple the number of its cable subscribers, gaining 12 million customers in cities including New York, Los Angeles and Dallas.
Charter has also been renegotiating its offer to buy billionaire Si Newhouse Jr.'s Bright House Networks for $10.4 billion. That agreement had been in jeopardy because it depended on Comcast closing its merger with Time WarnerCable, which has the right to match or block the deal because of a longstanding arrangement to negotiate programming and other deals for Bright House.
Cable providers have been expanding their Internet offerings to help offset the loss of cable subscribers. By opposing the Comcast merger, regulators have showed they are taking a hard look at deals that give companies too much power over broadband Internet, which is increasingly becoming the way that people watch TV.
Federal Communications Commission Chairman Tom Wheeler called Time Warner Cable's Marcus and Charter CEO Tom Rutledge recently to dispel notions that industry mergers won't be approved by regulators, a person with knowledge of the calls has said. Wheeler told the CEOs that any transaction would be judged on merit, and there was no flat ban on cable combinations, the person said.
Mergers may give cable companies more leverage when negotiating contracts with television networks, which could keep cable TV prices down for consumers.
Investors have been anticipating more deals. Cablevision Systems Corp., the No. 5 in the industry, rose 17 percent on May 20, the day Altice agreed to buy a controlling stake in Suddenlink Communications, the No. 7. Cablevision owns Newsday.