New Deals

, The Am Law Daily


Five Firms Advise on Comcast's $45 Billion Acquisition of Time Warner

One month after Time Warner Cable rejected a takeover bid as "grossly inadequate," the nation's second-largest cable company has attracted a better offer from a bigger buyer.

In a transaction officially announced last week, Time Warner has agreed to be purchased by Comcast, the country's leading cable provider. The all-stock deal is valued at about $45 billion, or roughly $67 billion when assumed debt is tacked on.

Closing—which is expected to come by the end of the year, pending the approval of regulators and both companies' shareholders—is no certainty. To consummate the deal, the country's two largest cable providers will need to survive what is sure to be a rigorous regulatory approvals process. Comcast apparently expects a tough path to closing, as it began seeking advice about regulators' potential objections to a deal in November, according to Reuters. The deal needs approval from the U.S. Federal Communications Commission, as well as either the U.S. Department of Justice or the Federal Trade Commission.

New York Senator Charles Schumer, who initially praised the deal, issued a statement Monday recusing himself from reviewing the agreement after an American Lawyer story named his brother, Robert Schumer, a partner atPaul, Weiss, Rifkind, Wharton & Garrison, as its "Dealmaker of the Week" for his involvement as an adviser to Time Warner. The senator sits on the U.S. Senate subcommittee on antitrust. A spokesman said the senator and his brother "had never discussed the matter before" and that the article in American Lawyer "was the first Senator Schumer learned that his brother had worked on the deal."

Comcast has already moved to assuage antitrust concerns by saying it plans to divest roughly three million Time Warner subscribers right away to lower the number of subscribers it would acquire in the deal to eight million. Both companies have also been quick to insist that the deal "will not harm competition or reduce consumers' choice in any way," because, according to Comcast, the two companies "do not currently compete to serve customers in any zip code in America." Comcast added that the combined company's total U.S. market share of subscribers will remain under 30 percent.

In announcing the agreement, Comcast said the acquisition would generate roughly $1.5 billion in annual savings and increase the company's subscriber base from 22 million to 30 million. Comcast said the deal will also improve its cloud computing offerings to businesses, while expanding its access to advertisers in certain key markets.

Under the deal's terms, Time Warner shareholders will receive 2.875 Comcast shares for each of their Time Warner shares and, ultimately, a 23 percent ownership stake in Comcast. In order to offset price dilution resulting from the issuance of the new shares, Comcast said it plans to expand its share-buyback program by $10 billion once the Time Warner acquisition closes.

New York–based Time Warner had previously rejected a $61 billion offer from Charter Communications—an investment vehicle for billionaire John Malone's Liberty Media that is the nation's fourth-largest cable provider—that valued the target's shares at $132.50 apiece.

In responding to that bid, Time Warner CEO Rob Marcus said his company would only consider a Charter takeover offer if came in closer to $160 per share. Philadelphia-based Comcast got there first, reaching an agreement that values Time Warner shares at $158.82 apiece—a 17.3 percent premium over Time Warner's closing price the day before the announcement and a 19.9 percent premium over Charter's bid.

Leading the way for Comcast is Davis Polk & Wardwell along with Willkie Farr & Gallagher.

The Davis Polk team includes New York-based corporate partnersDavid Caplan and William Chudd. Additional New York lawyers are antitrust partner Arthur Burke, tax partner Avishai Shachar, executive compensation partner Kyoko Takahashi Lin and intellectual property partner Frank Azzopardi. Capital markets partner Bruce Dallas is assisting from Menlo Park. Associates are Cheryl Chan, Gillian Emmett, Lee Hochbaum, Adam Perry and Christopher Utecht.

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