Report: Cox Memo Denies Meetings With Liberty, Charter

Esser Dismisses Bloomberg Report to Employees

An internal memo to Cox Communications employees denied speculation that company CEO Patrick Esser had preliminary talks with Liberty Media concerning a possible merger, a report in the Atlanta Journal-Constitution said Friday.

Wall Street was in a tizzy early Friday after a report in Bloomberg News said that Esser “has discussed a deal” with officials at Liberty about a possible combination with Charter Communications. Liberty owns a 27% interest in Charter.

 The Bloomberg report, citing people familiar with the matter, said the parties had not decided on any details, including who would buy who. Bloomberg also said that Cox and Charter have not begun direct talks.

The report sent shares of Charter skyward – they closed at $134 per share, up $6.04 each or about 5% on Friday (Aug. 2). Shares of Time Warner Cable, another target of Charter and Liberty Media chairman John Malone, plunged earlier in the day before leveling off to finish at $117.10 each, down 58 cents per share on Aug. 2.

According to the Atlanta Journal-Constitution, which is owned by Cox Communications parent Cox Enterprises, Esser dismissed the Bloomberg report and denied having met with Charter and Liberty representatives.   

“While our standard policy is to not comment in the press on rumors related to mergers and acquisitions, the media continues to persist with these rumors and I felt it important to let you know that they are just that — rumors and speculation,” Esser wrote in the memo, according to the AJC.

Cox officials declined to comment, but a source inside the company said the AJC story was accurate.

Wall Street has been engulfed in merger fever ever since reports surfaced that Liberty was pushing for a marriage between Charter and Time Warner Cable in June. While Time Warner Cable has rebuffed those advances, the pressure has mounted for some sort of deal to be made.

Liberty chairman John Malone has been an aggressive proponent of acquiring scale to combat high programming costs. He has publicly called Charter a “horizontal acquisitions machine,” and sees the Stamford, Conn.-based MSO as a vehicle with which to consolidate the industry.

In a report Friday, Moffett Research principal and senior analyst Craig Moffett wrote that a Cox/Charter deal, “makes a ton of sense for Charter.”

“Cox, at 4.8 million video subscribers, is close to the same size as Charter (at 4.4 million, pro forma for Bresnan),” Moffett continued. “Nosebleed leverage wouldn’t be necessary; a merger of equals would leave balance sheet room for subsequent deals, while still giving Charter the benefit of a doubling of scale.”