Comcast’s $45 billion takeover of Time Warner Cable has a lot of numbers that stand out. Among them is the breakup fee if either side walks away.
That figure is zero.
The news release announcing the merger on Thursday makes no mention of a breakup fee. And top executives from both companies confirmed that there was none.
What most analysts and investors would have expected is a payment that Comcast would make to Time Warner Cable if the deal fell apart, particularly if regulators blocked the transaction. Though how much the acquirer would pay in a so-called reverse termination fee varies, one customary amount is about 3 percent of the transaction value; in this case, it would be about $1.35 billion.
Other mega deals, including the merger of Citibank and Travelers, have lacked breakup fees. On a conference call with reporters, Comcast’s chief executive, Brian Roberts, said that he could not recall any merger that his company had done having a breakup fee. Not even its takeover of NBC Universal, which cost roughly $30 billion, contained one.
But other transactions have had sizable breakup costs. In its $39 billion attempted takeover of T-Mobile USA, AT&T paid a hefty charge to its would-be target when the deal collapsed in late 2011. (The size of that fee depends on whom you ask: AT&T said that it paid $4 billion, while T-Mobile’s parent company, Deutsche Telekom, valued it at $6 billion. The difference came down to a matter of accounting.)
There are two ways of looking at the absence of a breakup fee. Comcast and Time Warner Cable are contending that they are so confident the deal will pass regulatory review that they do not need a breakup fee. And given the high price of the Comcast bid, neither expects Charter Communications or any other rival to try and make a better offer.
“The absence of a break fee reflects our confidence of getting a deal done,†Robert Marcus, Time Warner Cable’s chief executive, said on the reporter call.
On the other hand, AT&T and its advisers argued the opposite in the company’s bid for T-Mobile, saying that the fee was a sign of how committed it was to seeing the transaction through.
