Bright House Networks, the sixth largest U.S. cable operator, is preparing to abandon a $10.4 billion deal to be acquired by larger peer Charter Communications Inc (CHTR.O), according to people familiar with the matter.
Charter, the No. 4 U.S. cable operator, clinched the deal with Bright House in March contingent on completion of Comcast Corp's (CMCSA.O) $45.2 billion merger with Time Warner Cable Inc TWC.N. Comcast walked away from the Time Warner Cable deal last month because of antitrust hurdles.
Charter's agreement with Bright House includes a 30-day provision for them to renegotiate a deal in this event. That period lapses in about two weeks. Even though negotiations are still formally continuing, Bright House, which is controlled by the Newhouse family, owner of magazine publisher Conde Nast, now believes it best to remain independent, the people said this week.
Time Warner Cable has an agreement to negotiate programing rates for Bright House, as well as share technology, in exchange for a fee. Bright House would rather not change this arrangement by partnering with Charter, which is a smaller operator than Time Warner Cable, the people added.
The sources asked not to be identified because the deliberations are confidential. Bright House Networks, Charter and Time Warner Cable representatives declined to comment.
Last week, Charter Chief Executive Tom Rutledge said on the company's earnings call he was negotiating with Bright House "in good faith." Time Warner Cable has the right of first refusal in the event Bright House pursues a sale.
The U.S. cable TV industry has been rapidly consolidating in recent years to counter the growing popularity of satellite TV and Web-based entrants such as Netflix Inc (NFLX.O).
The Bright House deal would have made Charter, whose biggest shareholder is John Malone's Liberty Broadband Corp, the No. 2 U.S. cable TV provider. It would have helped Charter expand in Florida, a market where Bright House has a strong presence. Charter's key markets include Alabama, Georgia, Michigan and California.
Charter is now in negotiations to acquire Time Warner Cable, people familiar with the matter have previously said.
Time Warner Cable's deal with Comcast fell through after U.S. regulators raised concerns that it would give Comcast an unfair advantage in the cable TV and Internet-based services market.
Charter last week reported a first-quarter net loss of $81 million, or 73 cents per share, up from $37 million, or 35 cents per share, a year earlier.
(Reporting by Liana B. Baker in Chicago; Editing by Christian Plumb)