In an effort to get its pending merger with Time Warner Cable approved, Comcast has announced plans to divest millions of customers to Charter Communications.
In total, the three-fold deal covers about 3.9 million video customers.
First, Comcast will divest TWC systems serving about 1.4 million existing Time Warner Cable customers to Charter for $7.3 billion, which Charter will fund via proceeds from debt.
Second, Comcast and Charter will swap assets serving approximately 1.6 million existing Time Warner Cable customers and 1.6 million Charter customers, which Comcast said will improve the geographic presence of both companies.
Finally, Comcast will spin off a new, independent, publicly traded company - currently dubbed SpinCo - that will cover about 2.5 million existing Comcast customers. Charter will own about 33 percent of SpinCo, worth about $2.1 billion.
As detailed in the map below, most of the markets are in the Midwest, including Ohio, Indiana, and Kentucky.
"The transactions announced today will provide Charter with greater scale, growth opportunities and improved geographical rationalization of our cable systems, which in turn will drive value for shareholders and more effective customer service," Tom Rutledge, president and CEO of Charter, said in a statement. "And through our meaningful ownership in and board representation at SpinCo, we can help it achieve similar market share growth in the markets it serves."
The announcement comes shortly after Charter urged TWC customers to reject the Comcast merger. In a March proxy statement submitted to the Securities and Exchange Commission (SEC), Charter argued that the Comcast-TWC deal is far from a done deal and carries significant regulatory risk. But Charter was not looking out for TWC investors out of the goodness of its heart, of course. The cable company made its own bid for TWC at for $82.54 per share, which the TWC board of directors found to be "grossly inadequate." Ultimately, Comcast offered $158.82 per share.
The deal won't happen unless Comcast's merger with Time Warner Cable is approved by regulators. That acquisition has faced opposition from consumer groups, members of Congress like Sen. Al Franken, and Netflix. But ultimately, the deal must pass muster at the Department of Justice and Federal Communications Commission.
