Comcast customers in Minnesota would get a new cable company as part of a national three-company deal being proposed to push through Comcast’s proposed takeover of Time Warner Cable.
Time Warner customers in Wisconsin also would get a new provider: Charter Communications.
Comcast announced on Monday the series of transactions that also are designed to lower its debt. The cable giant would spinoff 2.5 million subscribers, including those in Minnesota and other states, into a new not-yet-named cable company that the three companies would create.
Time Warner cable systems in Wisconsin and other states, with 1.4 million subscribers, would be sold to Charter.
Comcast currently is the No. 1 cable and Internet provider in Minnesota and operates a four-state regional headquarters near downtown St. Paul employing 700. The company in January signed a 10-year lease on the site, located at 10 River Park Plaza, and announced plans to renovate it.
In February, Philadelphia-based Comcast bid $45.2 billion for Time Warner Cable, topping a previous Charter offer. Monday’s moves are designed to shrink Comcast’s national footprint as it seeks government approval of the merger, currently facing opposition in Washington. The moves are contingent on that approval and other conditions.
After the merger, Comcast and Charter Communications Inc. will form a new publicly traded holding company, with Charter owning about a third, and shareholders of the merged Comcast-Time Warner Cable owning the remaining 67 percent.
Comcast said that after its combination with Time Warner Cable closes, the transactions will give it less than 30 percent of homes that subscribe to cable or satellite TV in the U.S.
Comcast said in an investor presentation that it puts the deal’s initial value to Comcast shareholders at $19.5 billion.
Charter said the acquisition of the Time Warner Cable subscribers will boost its residential and commercial video customer base to about 5.7 million from 4.4 million. Charter and Comcast also will exchange about 1.6 million customers.
Stamford, Conn.-based Charter estimates the acquisition of the cable systems will cost approximately $7.3 billion. It estimates the value of the spinoff company at about $14.3 billion.
Charter President and CEO Thomas Rutledge, who would head the new company, said during a conference call that the transactions would help broaden Charter’s footprint in the Midwest and Southeast. Charter would acquire systems in Ohio, Kentucky, Wisconsin, Indiana and Alabama. It would also shed systems in California, New England, Tennessee, Georgia, North Carolina, Texas, Oregon, Washington and Virginia.
Rutledge said the new footprint would give Charter access to significantly underpenetrated areas and also would be easier to operate.
The spinoff company Comcast is creating would own systems adjacent to Charter systems in Michigan, Minnesota, Indiana, Alabama, Eastern Tennessee, Kentucky and Wisconsin.
Comcast said the new cable provider it is creating and spinning off will have a nine-member board. That will include six independent directors and three appointed by Charter. Comcast itself will have no ownership stake in the spun-off company and will have no role in managing it. Charter will manage the new company.
Both Comcast and Charter’s boards have approved the transactions, which are subject to the closing of Comcast’s deal with Time Warner Cable, approval by Charter shareholders and other conditions. Time Warner Cable’s board also has signed off on the deal.
Comcast plans to use proceeds from the transactions to lower its debt. It still anticipates its combination with Time Warner Cable to bring about $1.5 billion in operating savings. The combination is targeted to close by year-end.
