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Time Warner Cable Loses One Suitor, While Another's in the Wings

Sunday, 26 April 2015 11:10 AM

Time Warner Cable Inc., the second-largest U.S. cable-TV provider, just lost a suitor. Another may be waiting in the wings.

Comcast Corp. dropped its $45.2 billion deal, valued at about $158.82 a share, to buy Time Warner Cable Friday after concluding regulators would reject it. Charter Communications Inc.’s advisers have already reached out to Time Warner Cable to begin talks on an acquisition, people with knowledge of the matter said.

Charter, the fourth-largest U.S. cable provider, lost out to Comcast more than a year ago in an effort to buy Time Warner Cable. Now it wants another shot. John Malone, who controls Charter’s largest investor, Liberty Media Corp., said “hell yes” in November when asked if Charter would try again if the Comcast deal failed.

The big question isn’t whether Charter will bid again, but for how much. It would likely have to dole out more than Comcast agreed to pay, which topped Charter’s own $132.50-a-share hostile bid in January 2014. Time Warner Cable shares have increased about 14 percent since then. The price could be at least $151 a share, according to an estimate from Craig Moffett, an analyst at MoffettNathanson.

“Time Warner Cable showed no appetite for being acquired by Charter at the time, and our suspicion is that that hasn’t changed,” Moffett said late Thursday in a note to clients. “Time Warner Cable is certain to argue that they are worth more now than they were then.”

Banks Approached

Charter’s goal is to buy Time Warner Cable quickly, said the people, who asked not to be identified because the deliberations are private. Charter, based in Stamford, Connecticut, has approached banks about financing, one person said. Executives at the companies haven’t spoken yet and the issue of price or structure hasn’t been addressed, the people said. The talks may not result in a deal, they said.

After the planned merger with Comcast was terminated, Time Warner Cable Chief Executive Officer Rob Marcus said that his company was “a one-of-a-kind asset.”

“We are confident we will continue to create significant value for shareholders,” Marcus said in a statement.

Time Warner Cable, which is based in New York, jumped 4.4 percent to $155.26 as the close in New York, giving the company a market value of about $43.6 billion. Charter rose 1.2 percent to $185.75.

After blocking Comcast’s deal, regulators have signaled they are taking a tough stance on mergers that give too much power over the broadband market to one company.

Easier Path

“Any company that considers buying Time Warner Cable must carefully consider whether they can get it through the regulatory approvals,” Laura Martin, an analyst at Needham & Co., said in a note to clients Friday.

Charter could make another attempt to buy Time Warner Cable in the next three months, Martin said. There don’t appear to be any other interested buyers, she said.

A Charter deal with Time Warner Cable could have an easier path with regulators, partly because the combined company would have fewer subscribers, said Geetha Ranganathan, an analyst at Bloomberg Intelligence. That combination would result in about 15 million video customers. Comcast’s deal with Time Warner Cable would have given the combined company about 29 million video customers.

And while regulators may have been concerned that Comcast’s ownership of NBCUniversal gave it too much power over TV programming and distribution, Charter wouldn’t raise the same concerns because it doesn’t own a TV network.

Bright House

The collapse of Comcast’s deal sets off a cascade of recalculations in the businesses of broadband Internet and delivery of television and movies. Another Charter deal, the agreement to buy Bright House Networks, is in jeopardy because it was contingent on the Comcast deal closing. Bright House has a total of 2.5 million subscribers.

Time Warner Cable has the right to block Charter’s agreement with Bright House as part of its long-time arrangement to negotiate programming and other deals for Bright House, the sixth-largest cable provider.

Instead of being acquired by Charter, Time Warner Cable could decide to buy Bright House, Ranganathan said.

“That would give Time Warner Cable ammunition if they weren’t interested in being acquired by Charter,” she said.

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Time Warner Cable Inc., the second-largest U.S. cable-TV provider, just lost a suitor. Another may be waiting in the wings.
time warner, comcast, cable, charter Communications
Sunday, 26 April 2015 11:10 AM
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