Comcast Corp.’s share price up, reaches an agreement with Charter Communications to sell subscribers in order to get regulatory approval for TWC deal

Comcast Corp. and Charter Communications Inc. reached an agreement, according to which the latter is to take over 3.9 million more cable-TV subscribers. The deal is supposed to help Comcast get the approval of regulatory authorities for its 45-billion-dollar acquisition of Time Warner Cable Inc., which was announced earlier this month. About 1.4 million existing customers of Time Warner Cable will be sold to Charter by Comcast for 7.3 billion dollars in cash.

Comcast Corp., also said it intends to form a new company that will be publicly traded and will serve another 2.5 million existing subscribers of the company. According to the statement it posted, its shareholders would hold 67% of the newly-formed company, while the remaining 33% would be held by Charter Communications. According to information revealed in a regulatory filing, the spin-off is estimated at about 14.3 billion dollars, which is its enterprise value. The equity value of the newly-formed company will amount to 5.8 billion dollars.

The Chief Executive Officer of Comcast – Mr. Brian Roberts commented on a conference call that was cited by Bloomberg: “This transaction today gives federal, state, and local regulatory bodies early identification of our divestiture process, which we believe should be helpful in our efforts to gain approval for our merger with Time Warner Cable.”

Right after posting its offer for Time Warner Cable in February this year, Comcast Corp. shared that it is ready to scrap about 3 million customers. Now the deal with Charter Communications is expected to be beneficial, because the company is to face a close regulatory examination. The Department of Justice and the Federal Communications Commission are to review the deal and after a thorough investigation if the antitrust issues and public interests are not violated, may provide their approval for the acquisition.

As reported by the Financial Times, Mr. Craig Moffett, who works in MoffettNathanson Research commented on the scrutiny under which Comcast will be put, saying: “Regulators weren’t going to settle for arm-waving about divestitures. They need to be able to review concrete details about which systems need to be divested and where. This checks the box with respect to completeness of the application. That is all it really does.”

Comcast Corp. was 1.43% up to close at 51.70 dollars per share yesterday, marking a one-year change of +24.97%. The market capitalization of the company as of yesterday was 134.01 billion dollars. According to the information published on CNN Money, the 22 analysts offering 12-month price forecasts for Comcast Corp. have a median target of 60.00, with a high estimate of 68.00 and a low estimate of 52.00. The median estimate represents a +16.05% increase from the last price of 51.70.