Maffei: Charter Investment Could Lead to Further Consolidation

Liberty CEO Says Cheap Money, Strong Management Could Spur Deal Market

Liberty Media CEO Greg Maffei told analysts Wednesday that he believes the climate could be right for further consolidation in the cable industry, but that it is up to its latest investment – Charter Communications – to decide if it wants to be a buyer or seller of systems.

Liberty Media recently closed on a $2.6 billion investment in Charter stock,  buying 27.3% of its outstanding shares and securing four seats on the MSO’s 11-member board of directors. Liberty has the right to expand that investment to 35% of Charter’s outstanding shares after 2016 and above 39.99% thereafter.

On a conference call with analysts Wednesday to discuss Liberty’s first quarter results Maffei said that while Charter doesn’t need to acquire more systems, it is well positioned to participate in any market consolidation that may arise.

 “The Charter business plan on a standalone basis is very attractive,” Maffei said, adding that the current economic environment of relatively inexpensive debt and cable’s steady cash flows could “suggest that we could be in for a round of consolidation. Whether Charter is a consolidator or a consolidatee, we’ll see.”

Maffei wouldn’t commit as to whether Liberty would be open to increasing its stake in Charter sooner than 2016.

“We have an opportunity to go up to 35% and then to 40%. It’s not an obligation,” Maffei said on the call. “We will be opportunistic.”

Also on Wednesday, Crestview Partners, one of Charter’s largest shareholders, announced that it will sell about 1 million Charter shares in a private placement offering. Charter will receive no proceeds from the sale. Asked why Liberty did not participate in the offering, Maffei said the timing wasn’t right.

Maffei said there could be possible issues with the Federal Communications Commission regarding de facto ownership if Liberty had participated in the Crestview offering.

“We weren’t the first and best buyer for Crestview’s shares,” he said.