March 12, 2008
If deal talks around Charter Communications Inc. really are heating up, analysts speculate that Time Warner Cable Inc. (NYSE: TWC) or Comcast Corp. (Nasdaq: CMCSA, CMCSK) could be among the most interested parties.
The buzz comes from an Securities and Exchange Commission (SEC) filing yesterday that says Paul Allen, a billionaire co-founder of Microsoft Corp. (Nasdaq: MSFT) and Charter's controlling shareholder, has received "informal inquiries" about potential deals or investments involving the cable MSO.
Charter did not identify any individuals or companies by name, but confirmed it had provided a few of those parties with "certain material non-public information under nondisclosure agreements."
As usual for this kind of filing, Charter also made it clear that there's no guarantee of a deal being struck.
So, who's talking to the MSO? Credit Suisse analyst Bryan Kraft told Thomson Reuters yesterday that Time Warner Cable is the most likely suitor.
Sanford C. Bernstein & Co. Inc. analyst Craig Moffett told Cable Digital News that "any large cable operator would jump at the chance to open Charter's books."
Moffett agrees that Time Warner Cable might be interested in some Charter systems, but not necessarily all of them. TWC might, for example, form a deal that consolidates the rest of the Los Angeles cable footprint. Or, it could grab systems in St. Louis and Kansas City, to gain almost complete coverage of Missouri.
Time Warner Cable has shown interest in cable systems that are located strategically to its own. Last year, it made public a desire to pursue the remaining properties of Insight Communications Co. Inc. , for example. (See Time Warner Seeking Insight .)
A Time Warner Cable spokesman declined to comment on any speculation involving Charter.
Another possible suitor is Comcast, though its footprint does not match up with Charter's as well as Time Warner Cable's does. Charter's Tennessee systems are among those that offer Comcast a geographic fit.
Any pieces of Charter that Comcast might pick up wouldn't cross the new Federal Communications Commission (FCC) cable ownership cap, Moffett notes. That cap, approved late last year, prohibits any U.S. cable operator from owning 30 percent or more of the pay TV universe. (See FCC Caps Cable .)
As for other speculative scenarios, Moffett suggested that a financial buyer could step in to buy Charter, then parcel out the systems to operators where the geographic fits are most logical.
The SEC filing capped off a busy day for Charter, which was getting its financial house in order.
Earlier Tuesday, the MSO announced Eloise Schmitz as its interim CFO, following the resignation of Jeffrey T. Fisher. The MSO also announced intentions to offer $500 million of second-lien notes due 2014, and plans to borrow up to $275 million of incremental term loans -- raising enough cash to last through at least 2009, according to the SEC filing. (See Charter Taps Interim CFO, Charter to Issue Lien Notes, and Charter Borrows $275M.)
— Jeff Baumgartner, Site Editor, Cable Digital News
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