Cable Operators

Report: Comcast Ready to Pair With Charter on TWC Deal

Bloomberg Says Cable Giant Would Take NYC, New England and North Carolina If Charter Lands Deal 1/27/2014 3:31 PM Eastern

Charter stock surged on Monday after a report that it was close to signing on Comcast as an ally in a Time Warner Cable takeover, with the Philadelphia-based MSO taking TWC systems in New York City, New England and North Carolina if Charter is able to seal a deal.

According to a report on Bloomberg.com citing unnamed sources, Comcast has an agreement in principal to buy the systems in New York, New England and North Carolina – near the cable giant’s existing clusters – from Charter, but only if the Stamford, Conn.-based cable operatior is able to convince TWC shareholders' to approve a takeover.

News of the potential pairing sent Charter’s stock soaring – it was up 4.1% ($5.46 per share) to $137.03 each in early trading. Comcast shares were up about 1.4% (70 cents each) to $53.10 and TWC shares were up slightly (45 cents or 0.3%) to $134.25 per share in afternoon trading Monday.

The possible inclusion of Comcast in a TWC deal has been speculated for weeks. Last week there were reports that Charter had reached out to Comcast for help in a TWC bid, but sources at the time said the talks were in the very preliminary stages. Apparently those discussions have heated up in the past few days.

Charter launched its $61.3 billion, $132.5 per share bid for TWC on Jan. 13  and was quickly rebuffed by TWC, which called the offer “grossly inadequate.” However, TWC did say it would accept a bid for $160 per share with a 20% collar that would protect both sides in the case of either’s stock price dropping dramatically.

Charter responded with a conference call on Jan. 14 that pointed to TWC’s operational shortcoming and called for shareholders to put pressure on company management to negotiate with Charter on a deal.

That strategy appeared to gain some traction last Friday when reports said that investment fund T. Rowe Price, which owns stakes in both Charter and TWC, reportedly sent a letter to TWC  management urging it to start talks with Charter.

News of the possible arrangement comes on the eve of Comcast’s release of fourth quarter and year- end earnings on Jan. 28. TWC is expected to release its fourth quarter results on Jan. 30, the same time it plans to shed more light on its operational strategy.  

While Comcast’s involvement would appear to bolster Charter’s chances for a deal – and give it some room to raise its offer price for TWC – according to the report it is contingent on TWC shareholders accepting a Charter offer. According to Bloomberg, Comcast and Charter have a “framework agreement,”  on what the larger operator would pay for the systems, which would in turn be contingent on the ultimate price that Charter pays for TWC.

Just how much those systems would be worth are also at issue. According to reports, TWC has about 3 million customers in New York City, New England and  North Carolina.

According to sources familiar with the deal, Comcast has been in informal talks with Charter for weeks, but that  nothing is imminent. Those sources added that Comcast would not be a part of a joint bid for TWC, nor would it be involved in any other actions Charter is making to secure a TWC purchase, including possibly putting together an alternative slate of directors for Time Warner Cable’s May annual meeting of shareholders.  Charter has until Feb. 15 to nominate a slate of directors, a process sources said it is currently working on .

But if Comcast does get involved, whatever it pays for the markets would help Charter finance its bid after the fact. And  it removes a potential competitor in the bidding for TWC.

Officials at Comcast , TWC and Charter each declined to comment.

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