Time Warner Cable Selloff Unlikely as Malone Stands By: Real M&A
2015-04-20 22:17:24.601 GMT
(For a Real M&A column news alert: {SALT REALMNA <GO>}.)
By Tara Lachapelle
(Bloomberg) -- The good news for Time Warner Cable Inc.
investors is that the shares won’t fall much if its merger with
Comcast Corp. collapses.
The planned $68 billion deal including debt, 431 days in
the making, is facing resistance from regulators. Comcast could
ultimately walk away if concessions needed to win approval are
too strict, people familiar with the matter said.
Given that Time Warner Cable’s revenue and earnings are on
the upswing, analysts see any shareholder losses in the absence
of a deal as minimal and probably temporary. The stock could
fall about 7 percent at most, according to the lowest estimate
compiled by Bloomberg. That compares with a potential gain of 11
percent if the deal still happens.
Backstopping Time Warner Cable’s share price is the
expectation that Charter Communications Inc. would buy the
company if Comcast doesn’t. Charter, backed by billionaire
dealmaker John Malone, was the original suitor for Time Warner
Cable back in 2013 before Comcast unexpectedly trumped its
offer.
“When I work through what this business is worth
regardless of a deal, I don’t see tremendous downside,” David
Heger, a St. Louis-based analyst for Edward Jones, said in a
phone interview. “Partly that’s based on the fundamentals of
the business, but also Charter is very interested in Time Warner
Cable and would potentially make another bid for them.”
Justin Venech, a spokesman for Charter, declined to
comment.
Justice Department
Time Warner Cable rose 0.8 percent on Monday to $150.87,
giving it a market value of $42 billion. The stock lost about 5
percent Friday after Bloomberg News reported that staff
attorneys at the U.S. Justice Department’s antitrust division
were nearing a recommendation to block Comcast’s bid. The two
companies will meet with the Justice Department this week.
As a stand-alone business, Time Warner Cable would be
valued at $140 a share, according to Mike McCormack, a New York-
based analyst for Jefferies Group. New Street Research’s
Jonathan Chaplin pegs it at $147. They both also note, however,
that Charter will probably buy Time Warner Cable if Comcast
doesn’t. Charter’s market value stood at $21 billion on Monday.
Charter Bid
Chaplin estimates Charter now would have to bid at least
$160 a share. Comcast’s all-stock offer was worth $158.82 when
it was announced in February 2013 and $168.10 on Monday.
“Charter is likely to come in pretty aggressively with
another offer, possibly at a premium to Comcast’s original
offer,” Jeff Wlodarczak, a New York-based analyst for Pivotal
Research Group, said in an e-mail. He also said Charter has more
financial flexibility: Its shares have risen 37 percent since it
formally bid for Time Warner Cable back in January 2014, and
Time Warner Cable has lowered its financial leverage.
Another option: Time Warner Cable becomes an acquirer. It
would be a reversal for the cable company, but Bright House
Networks, Cox Communications Inc. and even Charter are possible
targets, said Rich Greenfield, an analyst for BTIG. Charter
agreed to buy a majority stake in Bright House for $10.4
billion, but it’s contingent on Comcast’s Time Warner Cable
acquisition closing.
“It’s very possible that if this deal falls apart, Time
Warner Cable becomes the acquirer,” Greenfield said in a phone
interview. “Time Warner Cable is notably better now than they
were before, so there’s no way in the world they’re going to
sell for anywhere less than what Comcast offered.”
For Related News and Information:
Comcast, Time Warner Said to Discuss Deal With DOJ Wednesday
U.S. Antitrust Lawyers Said Leaning Against Comcast Merger
Comcast Deal Collapse Would Kill Other Mergers in Domino Effect
Real M&A columns: NI REALMNA <GO>
Top deal stories: DTOP <GO>
To contact the reporter on this story:
Tara Lachapelle in New York at +1-212-617-8911 or
tlachapelle@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Elizabeth Wollman
2015-04-20 22:17:24.601 GMT
(For a Real M&A column news alert: {SALT REALMNA <GO>}.)
By Tara Lachapelle
(Bloomberg) -- The good news for Time Warner Cable Inc.
investors is that the shares won’t fall much if its merger with
Comcast Corp. collapses.
The planned $68 billion deal including debt, 431 days in
the making, is facing resistance from regulators. Comcast could
ultimately walk away if concessions needed to win approval are
too strict, people familiar with the matter said.
Given that Time Warner Cable’s revenue and earnings are on
the upswing, analysts see any shareholder losses in the absence
of a deal as minimal and probably temporary. The stock could
fall about 7 percent at most, according to the lowest estimate
compiled by Bloomberg. That compares with a potential gain of 11
percent if the deal still happens.
Backstopping Time Warner Cable’s share price is the
expectation that Charter Communications Inc. would buy the
company if Comcast doesn’t. Charter, backed by billionaire
dealmaker John Malone, was the original suitor for Time Warner
Cable back in 2013 before Comcast unexpectedly trumped its
offer.
“When I work through what this business is worth
regardless of a deal, I don’t see tremendous downside,” David
Heger, a St. Louis-based analyst for Edward Jones, said in a
phone interview. “Partly that’s based on the fundamentals of
the business, but also Charter is very interested in Time Warner
Cable and would potentially make another bid for them.”
Justin Venech, a spokesman for Charter, declined to
comment.
Justice Department
Time Warner Cable rose 0.8 percent on Monday to $150.87,
giving it a market value of $42 billion. The stock lost about 5
percent Friday after Bloomberg News reported that staff
attorneys at the U.S. Justice Department’s antitrust division
were nearing a recommendation to block Comcast’s bid. The two
companies will meet with the Justice Department this week.
As a stand-alone business, Time Warner Cable would be
valued at $140 a share, according to Mike McCormack, a New York-
based analyst for Jefferies Group. New Street Research’s
Jonathan Chaplin pegs it at $147. They both also note, however,
that Charter will probably buy Time Warner Cable if Comcast
doesn’t. Charter’s market value stood at $21 billion on Monday.
Charter Bid
Chaplin estimates Charter now would have to bid at least
$160 a share. Comcast’s all-stock offer was worth $158.82 when
it was announced in February 2013 and $168.10 on Monday.
“Charter is likely to come in pretty aggressively with
another offer, possibly at a premium to Comcast’s original
offer,” Jeff Wlodarczak, a New York-based analyst for Pivotal
Research Group, said in an e-mail. He also said Charter has more
financial flexibility: Its shares have risen 37 percent since it
formally bid for Time Warner Cable back in January 2014, and
Time Warner Cable has lowered its financial leverage.
Another option: Time Warner Cable becomes an acquirer. It
would be a reversal for the cable company, but Bright House
Networks, Cox Communications Inc. and even Charter are possible
targets, said Rich Greenfield, an analyst for BTIG. Charter
agreed to buy a majority stake in Bright House for $10.4
billion, but it’s contingent on Comcast’s Time Warner Cable
acquisition closing.
“It’s very possible that if this deal falls apart, Time
Warner Cable becomes the acquirer,” Greenfield said in a phone
interview. “Time Warner Cable is notably better now than they
were before, so there’s no way in the world they’re going to
sell for anywhere less than what Comcast offered.”
For Related News and Information:
Comcast, Time Warner Said to Discuss Deal With DOJ Wednesday
U.S. Antitrust Lawyers Said Leaning Against Comcast Merger
Comcast Deal Collapse Would Kill Other Mergers in Domino Effect
Real M&A columns: NI REALMNA <GO>
Top deal stories: DTOP <GO>
To contact the reporter on this story:
Tara Lachapelle in New York at +1-212-617-8911 or
tlachapelle@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Elizabeth Wollman