Comcast Corp is buying Time Warner Cable Inc for $45.2 billion in an all-stock deal, combining the nation's two largest cable operators, according to people familiar with the matter.
Comcast has agreed to acquire all of Time Warner Cable for $158.82 per share in a friendly merger set to be announced on Thursday morning, the people said.
If successful, it will be the second time in little more than a year that Comcast has helped reshape the U.S. media landscape after its $17 billion acquisition of NBC Universal was completed in 2013.
The proposed combination, which would give roughly 23 per cent of the merged company to Time Warner Cable shareholders, is subject to regulatory approval and the two companies expect to close the deal by the end of the year, the people said.
The proposed merger between Comcast and Time Warner Cable would create $1.5 billion in operating savings, with 50 per cent of those savings expected in the first year, the people said, asking not to be named because the matter is not yet public.
Comcast has about 22 million video subscribers while Time Warner Cable has 12 million video subscribers. Comcast is planning to divest 3 million of its U.S. subscribers as part of the deal, which would leave it with about 31 million subscribers, representing just under 30 per cent of the market.
While the attempt to merge the two largest U.S. cable operators would face tough regulatory scrutiny, a divestiture of subscribers should help its case with regulators, said BTIG analyst Rich Greenfield.
"Comcast and Time Warner Cable don't compete and Comcast can easily divest a few million subscribers," he said.
Representatives of Comcast and Time Warner Cable declined to comment. Representatives for the U.S. Federal Communications Commission and the Department of Justice could not be reached for comment.
The proposed deal will be accretive to Comcast, which plans to expand its stock buyback program to $10 billion at the close of the transaction, people familiar with the matter said.
Smaller cable operator Charter Communications Inc had also been pursuing Time Warner Cable and went hostile this week by nominating a slate of directors to replace the entire board of Time Warner Cable. Charter offered $132.50 per share in a cash and stock deal last month that was rejected as too low.
Talks between Comcast and Time Warner Cable started about a year ago, but negotiations gathered pace in recent weeks, people familiar with the matter said. Time Warner Cable had told Comcast it considered Comcast to be its preferred buyer once Charter had approached them, the people said.
Officials at Charter did not respond to a request for comment.
Comcast had also been in talks with Charter about the possibility of carving up Time Warner Cable markets, but opted not to participate in a hostile situation, the people said.
Comcast is interested in advertising synergies by owning the New York City market as well as the opportunity to expand its business services unit to a larger footprint.
"For Comcast, adding New York and Los Angeles has advertising potential, along with Time Warner Cable's sports assets, which provides an acquisition target that is simply too compelling to ignore, especially with an (under-leveraged) balance sheet," Greenfield said.
Time Warner Cable owns two regional sports networks in Los Angeles.
The deal would be a coup for Time Warner Cable Chief Executive Rob Marcus, who just ascended to the top job on Jan 1. Filings show that the former mergers and acquisitions attorney is set to pocket $50 million if Time Warner Cable is sold and he is replaced while he is CEO.