Charter Communications is reported to be closing in on a pact with fellow US cableco Comcast over the sale of Time Warner Cable (TWC) assets, in the event of a potential takeover of TWC by Charter.
Two weeks ago Charter revealed that TWC’s management…
Charter Communications is reported to be closing in on a pact with fellow US cableco Comcast over the sale of Time Warner Cable (TWC) assets, in the event of a potential takeover of TWC by Charter.
Two weeks ago Charter revealed that TWC’s management had rebuffed its US$132.50 per share offer to buy the New York-based operator – a proposal which TWC later called “grossly inadequate”.
Under the arrangement with Comcast, Charter would acquire all of TWC but then sell its cable assets in New York City, North Carolina and New England to Comcast, people with knowledge of the matter told Bloomberg.
Those markets could be valued at around US$16bn, according to figures in the report based upon a per subscriber value extrapolated from Charter’s acquisition of Optimum West.
This would give Charter the ammunition to raise its offer past US$140 per share – where reports suggest TWC shareholders may be prepared to do business, in spite of management’s demands for a US$160 per share offer.
TWC is reported to have hired Centerview – to add to Morgan Stanley, Allen & Company and Citigroup – to advise on the merits of Charter’s offer.
The move follows pressure from some TWC shareholders which want the board to engage with Charter on a takeover.
Charter is said to be considering a direct tender offer to TWC shareholders in early-to-mid February and plans to nominate a number of directors for TWC’s board at that time, according to people familiar with the company’s plans cited in the report.
Charter already has committed financing, reported to be for US$20bn, from BofA Merrill Lynch, Credit Suisse, Deutsche Bank and Goldman Sachs. But the company may find it difficult to raise more debt as a combined Charter/TWC business would already be highly leveraged.
For Comcast the agreement would allow it to expand, but with a lower risk of antitrust consequences a full takeover of TWC would bring.
Last month a Federal Communications Commission official warned that should Comcast attempt to take over TWC outright, it would face significant regulatory difficulties in Washington.
Comcast is the largest cable operator in the US with roughly 22 million subscribers while TWC is second with circa 12 million. After that come Cox Communications and Charter, which both have less than five million customers.
