Cablevision Soars on Deal Speculation

Stock up 10% on Reports TWC Looking For Alternative To Malone

Cablevision Systems shares climbed as high as 10% on Monday after speculation swirled around the Bethpage, N.Y.-based MSO that it might be the target of Time Warner Cable.

Cablevision stock rose as high as $18.50 per share in early trading July 1 (up $1.68 each or 10%), before settling back slightly to close at $18.44 per share, up 9.6% or $1.62 each.

According to a Reuters report, Time Warner Cable has had talks with Cablevision and Cox Communications in the past few months about a possible combination. According to the story, which cited unnamed sources, Time Warner Cable was interested in a deal in part to ward off advances from Charter Communications and one of that MSO’s largest shareholders, Liberty Media chairman John Malone.

Cablevision has long been in Time Warner Cable’s sights – the MSO’s operations in the New York Metropolitan area are surrounded by TWC’s Manhattan system – but the company has always resisted selling. But in light of recent declines in its stock price and stagnant growth, some analysts believe the Dolan family, which controls the majority of Cablevision’s voting shares, may be more open to a deal.

Privately held Cox is generally thought to be one of the top MSOs in the country and consistently has placed at the front of customer service surveys.  It’s Orange County and San Diego systems would fit nicely with TWC’s Los Angeles properties, but Cox is family owned too and hasn’t given any indications of a desire to sell.

According to the Reuters article, talks between the three MSOs haven’t “progressed to any serious consideration of a transaction.”  The report also did not clarify when the talks occurred.

Officials at Cablevision and Cox both declined to comment on rumor and speculation.

For Cablevision, the speculation has been a major catalyst for its stock price. Since stories began surfacing in mid-June that Charter was on the hunt for acquisitions, Cablevision’s stock has risen more than 32%. TWC shares also have benefitted – they are up 17% since June 12.

There  are some signs that investors are beginning to tire of the back and forth though. As a result of the latest speculation, Charter stock declined 1.3% on July 1 to $122.22 each and TWC fell 1.4% ($1.53 each) to $110.95 .    

Time Warner Cable, according to reports, has rebuffed Charter’s initial advances because a deal would require the combined company to take on a massive amount of debt, something the New York-based MSO is loathe to do. Still, Charter has tried, according to several reports, to engineer a deal – including a combination that would involve Cablevision as well.

Cablevision’s 3 million customers combine with Cox’s 4.5 million customers would create a combined MSO that could rival Comcast for the top MSO spot in the nation. Comcast currently has about 22 million cable customers, a combined TWC, Cox and Cablevision would have nearly 20 million subscribers.