Deals of the Year 2014: Comcast Faces Screen Test

When Comcast Corp., the largest U.S. cable television and broadband Internet provider, announced in February that it was acquiring Time Warner Cable in a $69.8 billion deal, the takeover capped two contrasting career peaks for Brian Roberts and Robert Marcus.

For Roberts, 55, Philadelphia-based Comcast’s chairman and CEO, the prospect of a merger with Time Warner, the country’s second-largest cable company and No. 3 Internet provider, represented the latest milestone in a dramatic, deal-driven turnaround of the company he has led since the early 2000s. The purchase of AT&T Broadband for $72 billion in 2001 and the 2011 acquisition of NBCUniversal were among the key deals that transformed Comcast, which had less than $1 billion in annual revenue in the 1990s, into the media behemoth it is today, with revenue of $68 billion and a market capitalization exceeding $140 billion.

Marcus, 49, had served as chairman and CEO of New York–based Time Warner Cable for less than two months when the takeover was announced, but his employment contract entitles him to a severance payment of $79.9 million in cash, equity and benefits from the pending deal.

The merger represented another triumph for Paul Taubman, former co-president of investment banking at Morgan Stanley, who advised Comcast along with Barclays and JPMorgan Chase & Co. (Time Warner Cable was represented by Allen & Co., Centerview Partners, Citigroup and Morgan Stanley.) Taubman, who left Morgan Stanley in 2012 to form New York–based PJT Capital, has been so prolific as a solo deal maker that through November he ranked 14th on Dealogic’s 2014 U.S. M&A league table. Fees for the banks advising on the merger could total $140 million, according to Freeman Consulting Services and Thomson Reuters.

Whether the deal will go through, however, remains to be seen. It was always bound to be controversial: Combined, the two companies would have more than 33 million customers in cable TV and broadband Internet, or 33 and 40 percent of those respective markets in the U.S., highlighting concerns over concentration of media ownership. Comcast and Time Warner shareholders approved the deal in October, but the final say rests with the Federal Communications Commission, which is expected to hand down its decision in early 2015.

For once, however, the wild card isn’t the deal itself but the bigger debate taking place around it. In early November, President Barack Obama, fresh from the Democrats’ stinging defeat in the congressional midterm elections, came out in support of stronger regulation to protect net neutrality, the principle by which Internet service providers are bound to treat all traffic equally. Comcast has been at the forefront of legal efforts to block moves by the FCC to regulate in favor of net neutrality.