On the morning of Tuesday, May 26, Charter Communications (NASDAQ:CHTR) excited investors when the company proposed a three-way merger with Time Warner Cable (NYSE:TWC) and Bright House Networks. If the merger is approved, it would impact one in six American households and compete against big players like Comcast (NASDAQ:CMCSA), AT&T (NYSE:T), and Verizon Communications Inc (NYSE:VZ).
In the terms of the deal, Charter will pay Time Warner Cable $195.71 a share, or $78.7 billion. Charter CEO Tom Rutledge will also run the combined companies, which he is currently calling “New Charter.”
Time Warner Cable CEO Rob Marcus said in a statement, “With today’s announcement, we have delivered on our commitment to maximizing shareholder value.”
Some investors are wary the deal will not be approved by the FCC because of last year’s failed Comcast merger. In February 2014, Comcast proposed a merger with Time Warner Cable, which was denied due to monopoly precautions. However, FCC chairman Tom Wheeler told the CEOs of Charter and Time Warner earlier this month that “just because the FCC’s staff wasn’t convinced that the Comcast deals were in the public interest, they should not assume the agency is against any and all future cable deals.”
Furthermore, Wheeler said in a statement on Tuesday morning “The FCC reviews every merger on its merits and determines whether it would be in the public interest. In applying the public interest test, an absence of harm is not sufficient. The Commission will look to see how American consumers would benefit if the deal were to be approved.”
If the deal is approved, Charter and Time Warner have pledged to increase customer satisfaction but improving customer service, which both companies are not known for.
S&P Capital analyst Tuna Amobi weighed in on Time Warner on May 26, maintaining a Buy rating on the stock and increasing his price target from $170 to $180. The analyst noted, “We think [the combined company] will be very well-positioned to compete against the bigger guys.” Furthermore, Amobi has the upmost confidence in Charter CEO Tom Rutledge, describing him as “one of the best operators in the industry.”
Tuna Amobi has rated Time Warner Cable three times since 2010, earning a 100% success rate recommending the stock and a +34.1% average return per recommendation.
The analyst currently has another Buy position open on Time Warner Cable from November 5, 2014, when measured over a year. Investors who listened to Amobi’s recommendation would have earned a +27.5% profit on the stock.
Overall, Tuna Amobi has a 74% success rate recommending stocks and a +20.6% average return per recommendation.