Industry consolidation: the merger of charter communications with time warner cable

Abstract

The following case study is intended to describe the evolution of the American cable industry and the corporate actions pursued by its operators and sponsors since 1990’s. Charter Communications and Time Warner Cable, respectively the fourth- and second-largest cable operators, have been chosen to represent the industry trend of horizontal consolidation. On May 23, 2015, both firms agreed to merge forming New Charter, along with parallel Charter’s acquisition of Bright House Networks. Even though the ultimate goal of this case is to analyse the merger transaction, a deep analysis of each company’s roots and a description of competition environment and regulation framework are also presented to provide the necessary insights to perceive its drivers. Being the terms of the merger and business valuation its cornerstone, this case aims to look into the acquirer leveraging up to finance the acquisition of a much larger company, after having been through a reorganization process under Chapter 11 for having too much debt, and a firm that spun-off its operations from its parent company, inheriting its name and management. Therefore, these two corporate actions are also presented in detail. For his key role on Charter’s growth, public exposure, personal wealth, and career accomplishments, as co-founding Microsoft the most noteworthy, a follow-up on the $12 billion investment of Paul Allen in the cable industry is also described.