The basic underlying fact is that Comcast is more heavily invested in the east and Charter in the west, producing a natural divide of which the two companies can take advantage.
This would send the lion’s share of TWC Comcast’s way according to Wells Fargo’s Marci Ryvicker – it would get 67 markets with a total of 7.4M subscribers.
Charter’s take under this scenario would be 20 markets and 4.5M subscribers.
The answer WF has prepared if anyone were to wonder why Charter would accept the smaller piece of TWC is that 4.5M subs is (a) better than no subs; and (b) enough to double Charter’s size.
An impediment to the deal might be invocation of the 30% cap on cable reach, given the trouble the cap has had in court. A stronger regulatory issue is whether Comcast really wants to go under the microscope so soon after enduring the same to acquire NBCU. However, if the deal makes financial sense, WF believes Comcast will endure what it must to improve.
Ryvicker said Comcast could benefit from $1.4B in annual synergies, and Charter from $700M.
She also noted that a total price tag for TWC of $160 per share might be reasonable – that’s about $20 and change more than it’s trading for at the moment.
Ryvicker added a big caveat emptor: TWC’s pricy commitments in the regional sports business.