Merger Agreement Between Comcast and Time Warner Contains Unique Divestiture Provision | Practical Law

Merger Agreement Between Comcast and Time Warner Contains Unique Divestiture Provision | Practical Law

In the merger agreement signed by Comcast Corporation and Time Warner Cable Inc., the parties included a divestiture provision not typically seen in public merger agreements.

Merger Agreement Between Comcast and Time Warner Contains Unique Divestiture Provision

by Practical Law Antitrust
Published on 21 Feb 2014 • USA (National/Federal)
In the merger agreement signed by Comcast Corporation and Time Warner Cable Inc., the parties included a divestiture provision not typically seen in public merger agreements.
On February 12, 2014, Comcast Corporation agreed to acquire its competitor, Time Warner Cable Inc. in an all-stock transaction valued at $45.2 billion. The parties’ merger agreement includes a unique divestiture provision not typically seen in public merger agreements. Divestiture provisions may specify the assets that the parties will agree to divest to remedy an antitrust concern, and are a type of antitrust risk-shifting provision. Risk-shifting provisions should be considered when merging companies face antitrust risk, typically in deals between competitors. Without these provisions, a seller likely carries all the risk if the deal does not close for antitrust reasons.
The negotiated divestiture provision provides that Comcast would:
  • Divest up to approximately three million of the combined company's subscribers.
  • Accept other conditions that are consistent in scope and size to those imposed on other US domestic cable systems deals valued at $500 million or more that have closed within the past twelve years, other than any condition that was later suspended by the agency that imposed the condition.
  • Implement the undertakings set out on a schedule to the merger agreement (not publicly disclosed) with any modifications that, in the aggregate, are no more adverse to one party's assets or businesses than those of the other.
Comcast may terminate the deal if a governmental authority imposes a "burdensome condition," defined in the merger agreement as divestitures or other undertakings other than those Comcast has expressly agreed to make or take to obtain antitrust approval for the merger.
In addition, either Comcast or Time Warner may terminate the deal on the drop-dead date, February 12, 2015, which is one year after signing. However, either party may extend the drop-dead date by six months to August 12, 2015, if all closing conditions are satisfied or waived on that date other than the conditions requiring:
  • Receipt of governmental approvals, including Hart-Scott-Rodino Act or other antitrust approvals, as long as no burdensome condition is imposed on Comcast.
  • That there be no temporary or preliminary order or injunction either:
    • prohibiting the merger; or
    • imposing a burdensome condition on Comcast.
The agreement between the parties does not contain an obligation to litigate, which may mean the parties think they can negotiate a sufficient remedy to close the deal prior to the drop-dead date (whether initial or extended) without litigating. The parties also did not negotiate a reverse break-up fee.
For a summary of the antitrust risk-shifting provisions in the merger agreement between Comcast and Time Warner, see What's Market, Antitrust risk-shifting provisions in Comcast Corporation/Time Warner Cable Inc. merger agreement summary. For more information on the terms of the merger agreement, see What's Market, Comcast Corporation and Time Warner Cable Inc. merger agreement summary.