Charter Communications is preparing an offer letter of cash and stock to acquire Time Warner Cable for under $135 a share as early as next week, according to a Bloomberg story: A bid of $135 a share would value TWC at about $62 billion, including the value of its debt. That’s about 7.5 times estimates for its 2014 EBITDA of $8.24 billion, data compiled by Bloomberg show. Charter currently trades at a multiple of 8.7 times estimated 2014 EBITDA, while Comcast fetches 7.5 times.”
Comcast and Cox Communications are not part of the offer, sources told Bloomberg. Charter is also reportedly considering a joint deal with Comcast to acquire TWC together and split up its assets.
While Charter is raising about $25 billion in debt financing as part of a potential bid for TWC, Comcast reportedly does not plan to make a pre-emptive bid for TWC, but could jump in if signs emerge that Charter is getting close to a deal.
Comcast just named a new head of corporate development and strategy in Alexander Evans amid speculation that major MSOs in merger talks. Evans will join Comcast this month as an EVP. He will report to CFO Michael Angelakis. Evans hails from Providence Equity Partners, where he led the firm’s New York office and was global co-head of the communications sector. Comcast has tapped JPMorgan for advice as it evaluates a potential bid for the company as well.
“Time Warner Cable lost more video subscribers than any other major cable company in the most recent quarter, dropping 304,000 customers in the period, according to data compiled by Bloomberg. While a dispute with CBS added to the losses, that compares with a loss of 27,000 video subscribers at Charter and 129,000 fewer video customers at Comcast in the same period,” said the story.
Comcast could be interested in owning the cable assets of New York, Los Angeles, or both, Craig Moffett, an analyst at MoffettNathanson LLC, told Bloomberg. Comcast owns assets in California, as well as in the Eastern U.S.
“I wouldn’t be surprised if Comcast comes in to do a systems swap with Charter,” Harrigan said, referring to the possibility that the two cable companies could exchange geographic areas so that both could end up with contiguously placed markets that would be easier to service.
RBR-TVBR observation: Comcast is probably waiting to see how TWC reacts to Charter’s bid, then it would know better what number to offer. As well, TWC and Charter could do a deal and then look at accepting other offers, likely (of course) from Comcast.