Boston, MA 05/08/2014 (wallstreetpr) – Comcast Corporation (NASDAQ:CMCSA) agreed to divest its subscribers by virtue of the merger with Time Warner Cable. The realignment intends to increase the operational efficiency and geographic footprint.
Three ways agreement
The agreement include three transactions –
Comcast will divest systems business to Charter for an estimated amount of $7.3 billion of cash. It represents ~1.4 million existing customers of Time Warner Cable.
Secondly, Charter and Comcast will transfer assets through a tax-free exchange. It involves ~1.6 million of Charter customers and ~1.6 million TWC’s subscribers.
Finally, Comcast will spin off its cable systems business as a new company (SpinCo) to serve ~2.5 million existing Comcast customers that represents ~67% ownership in SpinCo. Then, Charter will acquire 33% of SpinCo in exchange with 13% of the equity (~2.1 billion) of new holding company to SpinCo shareholders.
Advantage over the transaction
The transaction will help the companies to manage their operations efficiently while providing high valued services to their customers. Charter will now own ~5.7 million video customers and will manage additional ~2.5 million SpinCo customers. As a result, Charter will increase its customer base to ~8.2 million that will create growth opportunities for Company and will make Charter as the second largest cable operator in the U.S.
On the other end, the transaction will reduce Comcast Corporation (NASDAQ:CMCSA)’s managed customers by 30% of total subscribers in the U.S., however, Comcast expects an operational gain of ~$1.5 billion from the merger with TWC. In addition, Comcast will benefit from asset sales with net cash proceeds of ~5 billion that will help to manage leverage while reducing its debt by ~$9 billion and expand its share repurchase capacity.
The transaction will provide revenue growth for Comcast Corporation (NASDAQ:CMCSA) while increasing the advertising opportunities to serve regional and enterprise businesses. It also sustainably improves the operational efficiency and increase the value for its shareholders.
