Charter prepares takeover offer for Time Warner cable
By DAVID GELLES
The New York Times | December 16,2013
Charter Communications is preparing to make an offer of less than $135 a share for Time Warner Cable, according to people briefed on the matter.
The offer, likely to come in the form of a so-called bear hug letter, would consist of a mix of cash and Charter stock, setting in motion a new round of consolidation in the cable operator industry.
Such a deal would have an equity value of around $38 billion. Charter could make its offer as early as next week.
Charter has been vocal about its appetite for a deal with Time Warner Cable, the second-largest cable operator after Comcast. In recent months, as speculation about a deal has increased, Time Warner Cable’s stock has surged from around $94 a share to as high as $138.22 per share. Shares closed at $131.41 on Friday.
Charter is said to believe it can get away with offering what is a small premium above the current trading price because of the steep run-up in recent months.
Charter is being advised by LionTree Advisors, a boutique investment bank run by former UBS head of mergers and acquisitions Aryeh Bourkoff, and Goldman Sachs.
Behind the scenes is media mogul John Malone, who once sold the country’s largest cable operator, TCI, to AT&T. Earlier this year, his holding company, Liberty Media, acquired 27 percent of Charter. Now Malone and Liberty Media’s chief executive, Greg Maffei, are encouraging Charter to make a bid for Time Warner Cable.
Though Charter would have to take on significant debt to pay for Time Warner Cable, people with knowledge of the company’s thinking say Charter believed it was a manageable amount, and the combined company could pay it down quickly. Time Warner Cable does not currently have much leverage and could support a larger debt load, those people said.
Time Warner Cable, however, appears in no rush to do a deal. Though its pay television subscribers are falling, it continues to find success providing high speed Internet and business services.
Earlier this year, Time Warner Cable approached Comcast about a merger, and Comcast appears to be taking the invitation seriously. Comcast has hired JPMorgan to advise it, a move that also gives it access to one of Wall Street’s biggest balance sheets. Such a deal would unite the two largest cable operators and face close antitrust scrutiny.
Charter’s plan to make a bear hug offer was reported earlier by Bloomberg News. All parties involved declined to comment.