Comcast, Time Warner Cable merger to net $1.5 billion in efficiencies, result in 2.4 times leverage

By Lisa Kerner

Charlotte, N.C., Feb. 13 - Comcast Corp. and Time Warner Cable Inc.'s proposed merger is expected to result in combined net debt of $71.4 billion and net debt to EBITDA of 2.4 times excluding synergies, said Comcast vice chairman and chief financial officer Michael J. Angelakis.

Comcast's net debt is $46.9 billion, and its net debt to EBITDA is 2.2 times. Time Warner's net debt is $24.5 billion, and its net debt to EBITDA is 3.1 times, according to the companies' presentation.

"We expect pro forma of approximately 2.2 times at year-end 2014," Angelakis said during a conference call to discuss the transaction details.

The companies announced Thursday that the agreement is a friendly, stock-for-stock transaction in which Comcast will acquire 100% of Time Warner Cable's 284.9 million shares outstanding for shares of Comcast.

Equity value of the transaction is about $45.2 billion, with a value to Time Warner Cable shareholders of about $158.82 per share.

"We expect the deal to be free cash flow per share accretive, provide strong returns, maintain our balance sheet strength and investment-grade profile, and provide us (with) the capacity to increase our return of capital, all while accelerating exciting growth opportunities for the company," said Angelakis.

Of the $1.5 billion in expected operating efficiencies, roughly half are expected in year one, according to Angelakis. The deal is expected to close by year-end, subject to approvals.

"Upon closing, we intend to expand our stock repurchase authorization by an additional $10 billion," said Comcast chairman and chief executive officer Brian L. Roberts on the call. That would bring the total authorization to about $15 billion at closing.

Time Warner will suspend its share repurchase program but continue to pay dividends, said chairman and CEO Robert D. Marcus.

Comcast is a Philadelphia-based telephone, television and internet service provider. Time Warner is a New York-based entertainment company.

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