TWC Stock Slips as Charter Offer Waits

Report Says Parties Don’t Agree on Deal Synergies

Shares of Time Warner Cable slipped Friday after reports that an anticipated bid from Charter Communications would not come until at least the New Year.

TWC shares fell slightly on Friday – closing at $132.46 each (down 1% or $1.28 per share) after a Reuters report that both participants were at odds regarding the respective synergies inherent in the deal.Charter stock finished the day up about 1% (90 cents) to $130.02 per share.

Charter was expected to issue a formal offer letter to Time Warner Cable this week, ending what has been about six months of speculation on whether a deal between the two cable giants could get done. But as of Friday afternoon, no letter was forthcoming and reports indicated that none would come until after the New Year, as the two sides continue to work out their differences.

Charter first began making overtures to TWC in June, as one of its largest shareholders – cable legend John Malone’s Liberty Media – had broached the subject of a merger with TWC management. Time Warner Cable rebuffed that offer, but investors hungry for a major cable deal, pumped the stock up by more than 30% in anticipation of a transaction.

Earlier in the month, reports said that TWC would be open to an offer in the $150 to $160 per share range and valuing the MSO at between $66 billion and $68 billion – a 14.5% to 22.1% premium to its trading price at the time. But some analysts were skeptical that Charter could raise the necessary funds for a deal that size. Earlier this week, reports said Charter was preparing a bear-hug letter for TWC at around $130 per share, valuing the company at about $60 billion.

But price isn’t the only thing that seems to be separating the parties from a deal. According to a Reuters report Friday, Charter and Liberty also can’t agree on the inherent cost synergies that would result from the merger. Reuters claims, citing unnamed sources familiar with the negotiations, that Charter believes synergies from lower programming costs, overhead and other redundancies would amount to about $700 million, while TWC favors a figure in the $500 million range. In a research report on Dec. 2,  MoffettNathanson principal and senior analyst Craig Moffett predicted synergies from a merger would be even lower – about  $450 million.

Officials at TWC and Charter declined to comment.