Obama Announcement Could Threaten Comcast-Time Warner Merger

Shares of Comcast, Time Warner both fall after "net neutrality" statement.


Shares of both Comcast and Time Warner Cable fell on Monday following President Obama’s announcement that he favored the reclassification of broadband internet service as a utility — and CNBC says the shock could put an end to the proposed merger between the two companies.

Shares of Comcast, the parent of CNBC, fell 4 percent Monday, the day of Obama’s announcement, while Time Warner Cable fell 5 percent. As a result of the moves, Time Warner Cable closed at the furthest point from Comcast’s implied all-share offer since the takeover was announced in February.

Here’s the math: Time Warner Cable closed Monday at $136.50, while Comcast’s offer of 2.875 Comcast shares per Time Warner Cable share implied a takeover price of $152.23 per share. The gap of $15.73 per share compares with an average of about $8.67 since the deal was announced and a low of $4.38 on April 10.

So that’s the financial reason the deal might break: As share prices go, Comcast would be overpaying for Time Warner.

But the deal has been moving slowly, and analysts say perhaps it’s good for Comcast to wait for the government’s final internet regulation rules before proceeding. “Tt’s better for the government to lay down any new net neutrality rules before Comcast and Time Warner Cable complete their deal,” CNBC’s John Jannarone writes. “The alternative might be that Comcast and Time Warner Cable be forced to accept company-specific rules in order to get the green light from regulators.”