Comcast Said to Weigh Subscriber Spinoff With Time Warner Deal

Comcast Corp. is weighing options for how to divest about 3 million cable subscribers as part of a takeover of Time Warner Cable Inc. -- including spinning them off in a new publicly traded company, people with knowledge of the matter said.

Regulators may push for the spin-out because it would create a new competitor, one of the people said, asking not to be identified discussing private information. A new company formed in such a way would be the fourth-largest U.S. cable company by subscribers, trailing the merged Comcast-Time Warner Cable, Cox Communications Inc. and Charter Communications Inc.

Comcast has also received interest from several companies that want to buy the cable assets, two of the people said. Charter is interested in the assets, Liberty Media Chief Executive Officer Greg Maffei said yesterday on a conference call, and Bright House Networks LLC and Suddenlink Communications, the sixth- and seventh-largest U.S. cable companies, have expressed interest in buying a portion of the 3 million subscribers, one person said.

Comcast CEO Brian Roberts said Feb. 13 he was prepared to divest subscribers as part of the takeover to keep the merged company’s assets below 30 percent of the U.S.’s total pay-TV market. Though there is no cap preventing a video provider from gaining in size, the Federal Communications Commission may decide it is in the public interest to limit Comcast’s reach, Leo Hindery, the managing partner of private-equity fund InterMedia Partners LP in New York, said in a Bloomberg TV interview this month.

No Decision

“While we don’t comment on specific situations, we will continue our longstanding practice of evaluating potential acquisitions that we believe would be a good strategic fit with our current operations,” said Pete Abel, a spokesman for Suddenlink.

D’Arcy Rudnay, a spokeswoman for Comcast, and Susan Leepson, a spokeswoman for Time Warner Cable, declined to comment. A spokeswoman for Bright House couldn’t be reached.

Comcast hasn’t picked which cities will be divested or spun out, and the Philadelphia-based company won’t make a decision for at least three months as regulators examine the Time Warner Cable deal the people said.

Tax Benefit

Comcast, which rose 1.2 percent to $51.69 yesterday in New York, is offering 2.875 shares for every Time Warner Cable share. Time Warner Cable rose 1.3 percent to $140.35.

Charter will stay flexible to make “acquisitions both for other systems or potentially the divestitures out of Time Warner,” Maffei, CEO of Liberty, said during the conference call. Liberty owns about 27 percent of Charter and is its largest shareholder.

“The industry is somewhat in a state of flux, not only on this deal, but on any proposed divestitures if the deal is successful,” he said.

A spinout would probably be the most tax efficient way for Comcast shareholders to profit from a divestiture, Paul Sweeney, an analyst for Bloomberg Industries, said in a phone interview. The 3 million subscribers could be worth about $17.6 billion, based on the value that the Time Warner Cable bid placed on each subscriber, Sweeney said.

Time Warner Cable had 11.4 million video customers at the end of 2013, compared with about 21.7 million at Comcast, data compiled by Bloomberg show.

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