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Comcast Sheds Subscribers in $22B Deal with Charter

NEW YORK (The Deal) -- Cable operators Comcast (CMCSA) and Charter Communications (CHTR) announced a blockbuster, three-part deal valued at nearly $22 billion on Monday.

Comcast said it aims to ease regulatory passage for the $67 billion purchase of Time Warner Cable (TWC) by divesting cable systems with 3.9 million subscribers.

"This transaction today gives federal, state and local regulatory bodies early identification of our divestiture process which we believe should be helpful in our efforts to gain approval for our merger with Time Warner Cable," Comcast CEO Brian Roberts told investors during a call.

Comcast CFO Michael Angelakis described the transaction as an "important progress in a critical step" in completing the merger with Time Warner Cable.

The tax-free transaction with Charter is conditioned upon closing of the Time Warner Cable deal.

In the first phase, Charter will purchase 1.4 million Time Warner Cable subscribers for cash equaling 7.125 times Ebitda, which the companies estimate will come to $7.3 billion. The cable operators will swap 1.6 million subscribers in the second phase.

In the deal's last part, Comcast will spin off a unit with 2.5 million subscribers, which will be worth about $14.3 billion. The valuation of the new company includes $5.8 billion in equity and $8.5 billion in debt.

Charter will issue stock to purchase a 33% stake in the business, Comcast shareholders will own the remainder.

The lead financial advisers to Charter were Goldman Sachs (GS) bankers Timothy Ingrassia, Peter Gross and Michael Smith, and a team from LionTree Advisors including Aryeh Bourkoff, Ehren Stenzler, Rohit Dube, Matt Feldman, Adam Judd and Michael Diaz.

Other financial advisers included Guggenheim Securities bankers Alan Schwartz, Glenn Schiffman, Eric Rutkoske and Mark Radin; Bank of America Merrill Lynch bankers Mark Bush, Dan Kelly and James Lindsay; Eric Federman and John Trousdale of Credit Suisse Group; and a Deutsche Bank Securities Inc. team including Mark Fedorcik, Malcolm Morris, Jacqueline Gordon, Don Birchenough, Scott Sartorius and Alexandra Barth.

Wachtell, Lipton, Rosen & Katz lawyers Steven Cohen, Jodi Schwartz, DongJu Song, Josh Feltman, Oliver Board, Valentina Cassata, Donald Casey and Michael Sabbah provided counsel to Charter, which also retained Kirkland & Ellis LLP.

JPMorgan Chase (JPM) and Paul J. Taubman provided financial advice to Comcast.

Comcast's counsel included David Caplan and William Chudd of Davis Polk & Wardwell and Willkie Farr & Gallagher lawyers Francis Buono, James Casserly, Michael Jones, Michael Hurwitz, Mia Hayes, Melanie Medina and Joshua Parker.

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