Rumors continue to swirl about Charter Communications (Nasdaq: CHTR) making a bid for Time Warner Cable (NYSE: TWC). According to the latest Bloomberg report, Time Warner Cable rebuffed Charter's initial offer, but that isn't deterring Liberty Media's (Nasdaq: LMCA) John Malone, who is said to be debating various scenarios for how he can raise enough cash to win over Time Warner Cable investors and make the deal happen.
Liberty Media owns 27 percent of Charter and Malone, who is chairman of Liberty Global (Nasdaq: LBTYA), has said he views Charter as a "horizontal acquisition machine." He also believes the key to success in the cable industry is scale.
According to the Bloomberg report, which cited unidentified sources familiar with the matter, a purchase of Time Warner Cable would include a premium of at least 20 percent, putting the transaction in the $37 billion or more range. Charter has a market cap of just $12.5 billion and its debt exceeds its market cap. Meanwhile, Time Warner Cable is much larger with a market cap of $31.5 billion, making this acquisition particularly challenging to structure. However, sources said Liberty is considering borrowing against its own balance sheet or Time Warner Cable's assets to raise the necessary cash for the deal.
Malone, a long-time cable industry veteran, has a history of negotiating cable deals in the United States and Europe. Back in the 1970s and 1980s, he built Tele-Communications Inc. into one of the largest cable TV companies before selling it to AT&T in 1999. That company later became part of Comcast (Nasdaq: CMCSA).
Consolidation has been a recurring theme among the nation's top cable MSOs, particularly as programming costs continue to rise and competition from over-the-top players is making it difficult to retain and attract subscribers.
In fact, Comcast co-founder and former vice chairman Julian Brodsky told FierceCable earlier this month at The Cable Show in Washington, D.C., that he believes there will soon be another push for consolidation in the industry, and he specifically pointed to Charter. "I think there is another wave of it, the most significant thing being Liberty [Media]'s investment in Charter, which I think is a significant event," Brodsky said.
In March, Liberty Media announced it was buying a 27 percent stake in Charter for $2.4 billion.
- see this Bloomberg article
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