Charter has met with Bank of America, Barclays and Deutsche Bank about a multibillion-dollar debt package to make a play for Time Warner Cable, The Wall Street Journal first reported late Thursday, citing anonymous sources. Charter might also looks for cash to take over TW Cable from “sovereign wealth funds and wealthy individuals,” according to the WSJ report.
Meanwhile, Comcast may be mulling a bid for Time Warner Cable. Comcast has sought “guidance on antitrust and telecommunications-related issues” for a potential takeover of TW Cable, CNBC reported Friday.
TW Cable’s stock hit $130.74 per share in early trading Friday, up 8.2% from the previous closing price. Charter shares rose as high as 4.7%, to $132.94 per share, before dropping back to under $130.
It’s no secret that Charter and Malone’s Liberty Media, which took a 27% stake in the operator this year, are on the acquisition hunt to gain scale through consolidation. Malone has said Charter could become “a horizontal acquisition machine” to gain economies of scale by buying up other MSOs.
“The whole name of the game in the cable business is scale,” Malone said at Liberty Media’s annual investor day in June. Charter will be “looking at other assets in the U.S. cable business that lack scale to have synergy.”
Time Warner Cable execs have reportedly spurned overtures from Charter/Liberty. There aren’t enough synergies to justify a merger without the assurance that Charter CEO Tom Rutledge could improve TW Cable’s operational efficiency, MoffettNathanson analyst Craig Moffett wrote in research note Friday. “And even then, the resulting entity would be frightfully levered (hence the appeal of a Comcast white-knight scenario),” he wrote.
On Charter’s third-quarter earnings call Nov. 5, execs declined to discuss the company’s M&A plans. But they acknowledged that the MSO’s net operating loss carry-forwards would provide tax benefits in a merger or acquisition. Charter exited bankruptcy reorganization in late 2009.
Glenn Britt, who is retiring as Time Warner Cable’s CEO at the end of 2013, said on the operator’s Q3 earnings call that the company was “open to deals” if they result in delivering value for shareholders.
Time Warner Cable had 11.41 video subscribers at the end of September, dropping a record 306,000 in the quarter in part because of contract fight with CBS that left subscribers in major markets without the Eye for a month. Charter had 4.18 million video customers at the end of Q3, losing a net 27,000 for the period.