Comcast ‘Love Fest’ With Time Warner Cable Makes Fee Moot
One notable feature missing from Comcast Corp.’s $45.2 billion deal to acquire Time Warner Cable Inc.: the breakup fee.
“The absence of a break fee reflects our confidence the transaction can get done,” Rob Marcus, Time Warner Cable’s chief executive officer, said in a conference call after the deal was announced.
Time Warner Cable investors will receive stock valued at $158.82, a premium of 17 percent to the closing price Feb. 12, making a higher bid unlikely. The absence of a breakup fee in the combination of the two largest U.S. cable companies also reflects the regulatory hurdles they face, according to Matthew Harrigan, an analyst at Wunderlich Securities Inc. in Denver.
“It sounds like this is enough of a love fest that they are just kind of throwing themselves at each other right now,” Harrigan said yesterday by phone. “If Washington says no, it’s nobody’s fault, so it isn’t really appropriate that there be a breakup fee.”
While a buyer often agrees to pay a fee to the seller in the event it can’t consummate the deal due to regulatory concerns, or a lack of financing, the penalties aren’t necessarily required in large deals. Just four of the 16 deals valued at more than $10 billion announced in 2013 included a reverse-termination fee, according to data compiled by Bloomberg.
The median breakup fee for deals announced from 2008 to 2012 ranged from 3.2 percent to 3.5 percent, according to a study from investment bank Houlihan Lokey. Based on the total value for Charter-Time Warner Cable of $45.2 billion, that would work out to about $1.4 billion to $1.6 billion.
Comcast CEO Brian Roberts said in the call that its purchase of NBCUniversal LLC also lacked a breakup fee.
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