Merger Pressure Mounts for Time Warner
The pressure's on at Time Warner Cable.
The Wall Street Journal reports that a shareholder fight may be on the agenda in early 2014 if Time Warner Cable Inc. (NYSE: TWC) doesn't consider a deal to merge with Charter Communications Inc. Charter has been courting Time Warner since John Malone's Liberty Global Inc. (Nasdaq: LBTY) took a 27 percent stake in Charter, the nation's fourth largest cable company, earlier this year. However, Time Warner has rebuffed advances from both Liberty and Charter executives.
Separately, Reuters has reported that Time Warner may be interested in a deal with Cox Communications Inc. or Cablevision Systems Corp. (NYSE: CVC), but no definitive details have emerged around either possibility.
According to the WSJ, an investor uprising at Time Warner could occur if no merger deal gets done shortly after Robert Marcus takes the helm as Chief Executive Officer. Glenn Britt is scheduled to step down from the position at the end of this year.
Keith Meister, head of the hedge fund Corvex Management LP, is seen as the likely rebel leader in a potential proxy war. Meister reportedly follows in the footsteps of mentor Carl Icahn, the legendary billionaire who has a made living out of stirring up shareholders attached to companies in his investment portfolio.
The theory is that the cable company needs to grow by merger or acquisition in order to compete in the increasingly cutthroat pay-TV environment. Consolidation would theoretically give Time Warner more leverage in licensing negotiations, extended reach with its broadband network, and increased buying power in the cable vendor market. (See: Behind Cable's Urge to Merge.)
While Time Warner reported an increase in revenues at the end of the last quarter, it also lost 93,000 residential customers. Rate increases are part of what kept Time Warner's financials up even as video subscriber numbers fell below the 12 million customer mark. (See: Broadband Saves TWC's Sales.)
— Mari Silbey, Special to Light Reading Cable