Cable Tech

TW Cable Eyes Acquisition Currency

Time Warner Cable filed an initial public offering prospectus today, a week after Cablevision Systems' controlling family launched a second attempt to take that MSO private. (See Going Private, Cable's New Competitive Weapon.) Coincidence? Not likely.

Time Warner has eagerly eyed a Cablevision buyout to strengthen its foothold in the strategic New York market. With a successful IPO, Time Warner Cable would finally have the stock and the access to debt financing (off the Time Warner corporate balance sheet) it needs to complete the deal. It would be the second shoe to drop, so to speak. Through its acquisition of Adelphia Communications in conjunction with Comcast in July, Time Warner Cable has already cornered the Los Angeles market.

In its S-1 filing detailing the terms of its planned IPO, Time Warner Cable notes, "we will not receive any proceeds from the sale of shares." In other words, this is not about raising capital -- it's about creating acquisition currency. And why stop with Cablevision? Privately held Cox Communications is another obvious target. That MSO's large cable systems in Orange County and San Diego are a perfect fit for Time Warner Cable's Southern California footprint.

So, if not Time Warner, who will receive the IPO proceeds? Shareholders of Adelphia Communications Corp. The S-1 assigns a value of $100 million to Adelphia's shares, but this is merely a placeholder figure for the prospectus. Wall Street valuations of Time Warner Cable top $40 billion, which would price the MSO's stock at over $40 a share. If the IPO goes off as planned, Time Warner Cable will count 976,913,430 shares of common stock, through which Time Warner Inc. will control 90.6 percent of shareholder voting power.

Read the rest of the story at Cable Digital News.

— Michael Harris, Chief Analyst, Cable Digital News

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