After a 2-Year Pursuit, Charter Finally Lands Time Warner Cable

$55 billion deal will make it the No. 2 U.S. cable company

Just one month after its merger with Comcast officially flatlined, Time Warner Cable is on the move again. Charter Communications announced today that it had reached a $55 billion cash-and-stock deal to acquire the country's second-largest cable operator.

For Charter, which is backed by Liberty Media chairman John Malone, today's news is the culmination of its two-year quest to land Time Warner Cable, which included several rejected offers in 2013 and a hostile takeover bid last year. 

In addition to the deal, which values Time Warner Cable at $78.7 billion (including debt), Charter is moving forward with a separate $10.4 billion deal to acquire Bright House Networks.

Charter, currently the fourth-largest U.S. cable operator, will become the country's second-largest company, behind Comcast, after these moves. The two deals would increase Charter's base to 24 million customers, close to Comcast's 27 million. The combined company will be called New Charter, while its services will be sold under the name Spectrum.

"I think there's a better industry as a result of this combination," Charter Communications CEO Tom Rutledge said Tuesday in a conference call with analysts. Rutledge said he was "confident" his company would receive regulatory approval, adding, "This transaction does not reduce competition in any market."

That was a reference to many of the anti-competitive concerns that finally led Comcast to abandon its own Time Warner Cable merger plans in April after 16 months. Rutledge pointed out that his company doesn't own content assets, which had been another big criticism about the Comcast-Time Warner Cable deal. Time Warner Cable CEO Rob Marcus said the new company would be "significantly smaller" than Comcast and Time Warner Cable. 

The Charter-Time Warner Cable deal, Rutledge said, will ensure "better products at better prices" for consumers (then again, isn't that said about every big merger?) with "significant" broadband infrastructure investments that will enhance online video and gaming, as well as out-of-home WiFi services.

In other words, it was an essential move on Charter's part to evolve with the needs of its consumers (note the significant emphasis on all things broadband).

Rutledge hopes the FCC's time spent reviewing the ill-fated Comcast deal should help accelerate its review of this deal, which analysts expect to go through later this year. The companies said they expect to save $800 million in operating expenses over three years.

Even odd-company-out Comcast is putting on a happy face and throwing its support behind the new merger. "This deal makes all the sense in the world. I would like to congratulate all the parties," said Brian Roberts, Comcast chairman and CEO.