Comcast agrees to buy Time Warner Cable

Comcast said Thursday it had agreed to buy Time Warner Cable for $45 billion in a deal that would combine the two biggest cable companies in the United States.

If the deal is approved, the combined group will be the country's dominant provider of television channels and Internet connections, reaching roughly one in three American homes.

 Time Warner Cable (TWC, Fortune 500) owners will be offered 2.875 Comcast (CMCSA, Fortune 500) shares for each share they own, valuing Time Warner Cable at about $158.82 per share.

The two companies expect the merger to take effect by the end of the year, but regulators are likely to take a close look at the potential impact on consumers.

To address those concerns, Comcast said it was prepared to divest about 3 million subscribers. But it would still have about 30 million customers. Comcast Cable CEO Neil Smit will lead the merged company.

The proposed deal ends months of jockeying for control of Time Warner Cable, the second biggest U.S. supplier of cable television, with about 11 million subscribers in cities such as New York and Los Angeles.

Smaller rival Charter (CHTR, Fortune 500) wanted to buy Time Warner Cable, indicating last month it was ready to pay about $130 per share.

 Now, by swallowing Time Warner Cable on its own, Comcast will gain even more leverage over the country's marketplace for television, broadband Internet and phone services. Comcast has about 23 million television subscribers in markets like Philadelphia, where it is headquartered.

With millions more subscribers, Comcast will add muscle in its negotiations with cable channel owners like The Walt Disney Company (DIS, Fortune 500) and Time Warner (TWC, Fortune 500), the parent company of this website. (Time Warner Cable was spun off from Time Warner in 2009 and no longer has any connection to the owner of CNN, HBO and Warner Bros.)

Although cable providers in general have poor reputations, Comcast has received some high marks for its next-generation software and set-top boxes.

Time Warner Cable, on the other hand, had what the American Customer Satisfaction Index called an "industry low" score last spring. It has shed television subscribers in recent months for a number of reasons, including a protracted blackout of CBS and Showtime in several million homes. Comcast could theoretically improve Time Warner Cable's performance by bringing in its own software.