By Shalini Ramachandran
Comcast Corp. is planning to drop its proposed acquisition of
Time Warner Cable Inc., according to people familiar with the
matter, after stiff resistance from U.S. regulators threw the
merger of the cable giants off track.
A withdrawal by Comcast would be a stunning turnaround for the
$45.2 billion deal, one of the largest proposed media mergers in
years. When it was announced in February 2014, many on Wall Street
believed the deal was likely to be approved, albeit with
concessions to regulators.
The Comcast-Time Warner Cable deal had promised to reshape the
media landscape--forcing TV channel-owners and other pay-TV
operators to contemplate their own mergers. If the deal falls
apart, companies across the industry could reassess their
calculations.
Scrutiny from the Federal Communications Commission and Justice
Department turned out to be more intense than investors and
analysts--and company executives--anticipated. Regulators worried
about the power Comcast would amass through the deal, with roughly
30% of the U.S. pay-TV market and 57% of the broadband market,
which the FCC now defines as speeds 25 megabits per second and
higher.
On Wednesday, the FCC staff recommended that the agency
designate the merger for a "hearing," people familiar with the
matter said, a procedural move that would spark a long, potentially
messy and costly legal battle. The staff's recommendation was that
approving the deal wouldn't be in the public interest, a sign that
Chairman Tom Wheeler was leaning against the deal, people close to
the agency's deliberations said.
Though Comcast could fight to preserve the deal, the drawn-out
process may not have been worth it, which is why such a hearing is
known by regulatory experts as a deal-killer.
Meanwhile, the Justice Department also has been stepping up its
review in recent weeks, asking media companies who oppose the deal
for examples of how Comcast may have abused its market power. The
government was also skeptical of whether some of the restrictions
it put on Comcast while approving its acquisition of NBCUniversal
had worked as intended, people familiar with the matter have
said.
Bloomberg News earlier reported Comcast's plans to drop the
purchase of Time Warner Cable.
Comcast walking away from the deal--which costs it nothing since
there was no breakup fee--will raise the prospect of another suitor
going after Time Warner Cable. Charter Communications Inc., which
pursued Time Warner Cable before it was snapped up by Comcast,
remains interested in the company, people familiar with the
situation said. Charter has been in contact with banks about a debt
package in recent weeks, one of the people said.
Time Warner Cable believes its assets are more valuable today
than they were a year ago thanks to better operating by management,
a person familiar with the company's thinking said. With its strong
balance sheet, TWC could be an acquirer in its own right should the
deal fall apart, the person said. Time Warner Cable has a roughly
$42 billion market capitalization.
Write to Shalini Ramachandran at
shalini.ramachandran@wsj.com
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