Previously the source of idle speculation among media analysts, the fallout from a rejected merger of Comcast (NASDAQ: CMCSA) and Time Warner Cable (NYSE: TWC) is starting to gain serious, credible examination.
"What are they going to buy if they don't buy this? Do they go wireless? Do they go Europe? Do they go in enterprise? Comcast is not going to just sit around," wondered BTIG Research analyst Richard Greenfield, appearing on CNBC's Squawk Box after it was reported Friday that the Department of Justice is seriously considering turning over its approval decision to an administrative law judge--a bad sign for the deal's approval.
Greenfield has previously speculated that Comcast could go after Netflix (NASDAQ: NFLX), Sprint or even Time Warner Inc. However, beyond Comcast's next move, the nixing of the deal would have broad impact on the cable industry, setting off what Bloomberg described Monday as a "domino effect."
Perhaps most impacted would be Charter Communications (NASDAQ: CHTR). The company is involved in a three-way deal with Comcast and TWC that's directly related to the mega-merger, with Charter set to gain 3.9 million video subscribers and become the majority shareholder in a spinoff MSO called GreatLand Connections.
That deal would be null and void, should regulators pull the plug on Comcast-TWC. Meanwhile, Charter's proposed $10.4 billion acquisition of Bright House Communications, announced late last month, would also be imperiled.
"If the TWC-Comcast deal doesn't occur, although we expect it to occur, you have a different asset, and you would have to talk about what those assets are in the deal," Charter president and CEO Tom Rutledge told investors in March while announcing the proposed buyout.
Of course, under the expressed ambitions of its principal shareholder, John Malone, Charter has made it no secret that it would take a second pass at trying to acquire TWC itself.
With TWC's stock up 13 percent since Charter entered a $132.50-a-share bid in January 2014, the price would be substantially higher.
For more:
- read this Bloomberg story
Related links:
Update: Comcast, TWC set to meet with DOJ following reports of merger blockage
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Comcast's backup plan? Possibly buy Netflix, Cablevision, T-Mobile … the list goes on, analyst Greenfield says
Bright House buy augments Charter's biz services strength