Time Warner Cable Talks Pit Malone Against Protege Drahi (1)
2015-05-23 23:33:24.535 GMT
(Updates with Liberty deals in 18th paragraph.)
By Marie Mawad, Ed Hammond and Kristen Schweizer
(Bloomberg) -- Merger talks over Time Warner Cable Inc. are
pitting French-Israeli tycoon Patrick Drahi against his former
boss: media mogul John Malone.
A bid for Time Warner Cable, the second-largest U.S. cable
company with a market value of $48 billion, would be the boldest
move yet for Drahi, just days after his Altice SA holding
company made a surprise foray into the U.S. with the
announcement of plans to buy a much smaller rival. It would also
incite a billionaire tug of war on Malone’s home turf. Malone’s
Charter Communications Inc. is also said to be pursuing Time
Warner Cable -- for the second time in about a year.
Time Warner Cable’s talks with Altice and Charter are
expected to continue through the weekend, and an accord with
either suitor could be reached as early as next week, according
to people with knowledge of the matter. The negotiations may
fall apart and there is no certainty a transaction will be
agreed on, the people said.
Dealmaking is heating up in an industry facing waning
demand for traditional pay-TV packages and intense competition
from Netflix, Amazon and other online services. Charter, the
fourth-largest cable provider in the U.S., is making another run
at Time Warner Cable after its early 2014 bid was rejected and
market leader Comcast Corp. swooped in with a competing offer.
The Comcast deal collapsed last month because of regulatory
opposition.
Considered Mentor
Drahi, 51, amassed a personal fortune of almost $22 billion
-- more than double Malone’s, according to the Bloomberg
Billionaires Index -- by building one of Europe’s most
acquisitive telecommunications and cable businesses that stretch
from Israel, France, Portugal to the Caribbean.
Seeking to extend his influence to the U.S. means Drahi has
to compete with a rival he’s so far viewed more as a mentor,
according to a person with knowledge of the matter. The two
businessmen know each other well and meet regularly, the person
said, asking not to be identified discussing a private matter.
In the late 1990s, Drahi sold one of his companies to
Malone and then worked for his UPC unit in Switzerland.
As the two billionaires later expanded their own empires,
they have largely avoided going head-to-head with each other,
and Malone has focused on markets such as Germany, the U.K. and
the Netherlands.
‘Aggressive Acquirer’
More recently, Altice and and Liberty Global Plc, Malone’s
European cable company, both looked at buying Royal KPN NV’s
Belgian carrier Base. Liberty’s local unit agreed to acquire the
asset last month for $1.4 billion.
“He’s a growth guy,” Malone told Bloomberg News on
Tuesday, just before Altice surprised investors with its
agreement to buy Suddenlink Communications, the seventh-largest
U.S. cable provider, in a deal valued at $9.1 billion. “He’s an
acquirer, an aggressive acquirer taking advantage of low-cost
debt right now and the ability to be pretty aggressive at
cutting costs out of what he buys.”
Altice Chief Executive Officer Dexter Goei last year
described the company as “the Liberty Global of the smaller
telecom opportunities.” This week, Goei said Altice will be
“right in the middle” of the wave of U.S. cable mergers and
acquisitions.
Everything “below Comcast effectively is in consolidation
mode,” Goei said during a May 20 analyst call to discuss the
Suddenlink purchase. Altice said it ultimately aims to have the
U.S. contribute to half of the company’s business.
‘Left-Field Disruptor’
The takeover of Suddenlink -- which will be financed mostly
using debt -- will lift Altice’s U.S. revenue to about 12
percent of its total, according to Neil Campling, an analyst at
Aviate Global in London, who called Drahi a “left-field
disruptor.”
“Drahi learned from the best oligopoly pioneer in the
world,” Campling said.
Time Warner Cable may fetch more than $54 billion in a
sale, according to a person with knowledge of the matter. For
Altice, which has a market value of $36 billion, financing a bid
for New York-based Time Warner Cable could be more complicated
than funding an offer for Suddenlink. Also, cross-borders deals
don’t offer as many cost-cutting opportunities as local ones.
‘Hell Yes’
A spokesman for Time Warner Cable declined to comment, as
did representatives for Charter and Altice.
Malone has a long history of disrupting the cable industry
around the world. He turned Tele-Communications Inc. in the
1970s and 1980s into one of the biggest pay-TV companies in the
U.S. before selling it to AT&T Inc. in 1999.
In Europe, Malone spent more than $50 billion over the past
decade consolidating the media industry and building Liberty
Global into one of the biggest international cable operators.
Liberty Global acquired British broadband provider Virgin Media
in 2013 and Ziggo NV in the Netherlands last year. More
recently, it has gone after sports rights with several content
deals and purchased a stake in U.K. commercial broadcaster ITV
Plc.
In the U.S., Malone’s influence over the Who’s Who of the
media industry has been wide-ranging. He controls companies
including premium cable channel Starz and Sirius XM Holdings
Inc., a satellite-radio company, and sits on the board of movie
studio Lions Gate Entertainment Corp. He’s known for engineering
complicated tax-free spinoffs and financial arrangements that
few can understand.
When asked in November whether Charter would attempt to buy
Time Warner Cable if the Comcast deal failed, Malone said,
“Hell yes.” And as soon as the deal with Comcast evaporated,
Charter immediately contacted Time Warner Cable about possibly
renewing talks, people familiar with the matter have said.
“At first blush, Altice’s interest in Time Warner Cable is
bad news for Charter,” Craig Moffett, an analyst at
MoffettNathanson, wrote in a note Wednesday following first
reports on a takeover bid by Altice. “If Altice can snatch away
Time Warner Cable, Charter is left at the altar. Again.”
For Related News and Information:
The French Billionaire Who Wants to Rule the U.S. Cable Business
Malone Says Liberty, Vodafone Make ‘Great Fit’ in Western Europe
Time Warner Cable Said in Sale Talks With Altice, Charter
Top Media Stories: TOP MED <GO>
--With assistance from Manuel Baigorri and Dinesh Nair in London
and Gerry Smith and Alex Sherman in New York.
To contact the reporters on this story:
Marie Mawad in Paris at +33-1-5530-6290 or
mmawad1@bloomberg.net;
Ed Hammond in New York at +1-212-617-1963 or
ehammond12@bloomberg.net;
Kristen Schweizer in London at +44-20-3525-7526 or
kschweizer1@bloomberg.net
To contact the editors responsible for this story:
Kenneth Wong at +49-30-70010-6215 or
kwong11@bloomberg.net;
Cecile Daurat at +1-302-661-7607 or
cdaurat@bloomberg.net
Kenneth Wong, Jacqueline Simmons
2015-05-23 23:33:24.535 GMT
(Updates with Liberty deals in 18th paragraph.)
By Marie Mawad, Ed Hammond and Kristen Schweizer
(Bloomberg) -- Merger talks over Time Warner Cable Inc. are
pitting French-Israeli tycoon Patrick Drahi against his former
boss: media mogul John Malone.
A bid for Time Warner Cable, the second-largest U.S. cable
company with a market value of $48 billion, would be the boldest
move yet for Drahi, just days after his Altice SA holding
company made a surprise foray into the U.S. with the
announcement of plans to buy a much smaller rival. It would also
incite a billionaire tug of war on Malone’s home turf. Malone’s
Charter Communications Inc. is also said to be pursuing Time
Warner Cable -- for the second time in about a year.
Time Warner Cable’s talks with Altice and Charter are
expected to continue through the weekend, and an accord with
either suitor could be reached as early as next week, according
to people with knowledge of the matter. The negotiations may
fall apart and there is no certainty a transaction will be
agreed on, the people said.
Dealmaking is heating up in an industry facing waning
demand for traditional pay-TV packages and intense competition
from Netflix, Amazon and other online services. Charter, the
fourth-largest cable provider in the U.S., is making another run
at Time Warner Cable after its early 2014 bid was rejected and
market leader Comcast Corp. swooped in with a competing offer.
The Comcast deal collapsed last month because of regulatory
opposition.
Considered Mentor
Drahi, 51, amassed a personal fortune of almost $22 billion
-- more than double Malone’s, according to the Bloomberg
Billionaires Index -- by building one of Europe’s most
acquisitive telecommunications and cable businesses that stretch
from Israel, France, Portugal to the Caribbean.
Seeking to extend his influence to the U.S. means Drahi has
to compete with a rival he’s so far viewed more as a mentor,
according to a person with knowledge of the matter. The two
businessmen know each other well and meet regularly, the person
said, asking not to be identified discussing a private matter.
In the late 1990s, Drahi sold one of his companies to
Malone and then worked for his UPC unit in Switzerland.
As the two billionaires later expanded their own empires,
they have largely avoided going head-to-head with each other,
and Malone has focused on markets such as Germany, the U.K. and
the Netherlands.
‘Aggressive Acquirer’
More recently, Altice and and Liberty Global Plc, Malone’s
European cable company, both looked at buying Royal KPN NV’s
Belgian carrier Base. Liberty’s local unit agreed to acquire the
asset last month for $1.4 billion.
“He’s a growth guy,” Malone told Bloomberg News on
Tuesday, just before Altice surprised investors with its
agreement to buy Suddenlink Communications, the seventh-largest
U.S. cable provider, in a deal valued at $9.1 billion. “He’s an
acquirer, an aggressive acquirer taking advantage of low-cost
debt right now and the ability to be pretty aggressive at
cutting costs out of what he buys.”
Altice Chief Executive Officer Dexter Goei last year
described the company as “the Liberty Global of the smaller
telecom opportunities.” This week, Goei said Altice will be
“right in the middle” of the wave of U.S. cable mergers and
acquisitions.
Everything “below Comcast effectively is in consolidation
mode,” Goei said during a May 20 analyst call to discuss the
Suddenlink purchase. Altice said it ultimately aims to have the
U.S. contribute to half of the company’s business.
‘Left-Field Disruptor’
The takeover of Suddenlink -- which will be financed mostly
using debt -- will lift Altice’s U.S. revenue to about 12
percent of its total, according to Neil Campling, an analyst at
Aviate Global in London, who called Drahi a “left-field
disruptor.”
“Drahi learned from the best oligopoly pioneer in the
world,” Campling said.
Time Warner Cable may fetch more than $54 billion in a
sale, according to a person with knowledge of the matter. For
Altice, which has a market value of $36 billion, financing a bid
for New York-based Time Warner Cable could be more complicated
than funding an offer for Suddenlink. Also, cross-borders deals
don’t offer as many cost-cutting opportunities as local ones.
‘Hell Yes’
A spokesman for Time Warner Cable declined to comment, as
did representatives for Charter and Altice.
Malone has a long history of disrupting the cable industry
around the world. He turned Tele-Communications Inc. in the
1970s and 1980s into one of the biggest pay-TV companies in the
U.S. before selling it to AT&T Inc. in 1999.
In Europe, Malone spent more than $50 billion over the past
decade consolidating the media industry and building Liberty
Global into one of the biggest international cable operators.
Liberty Global acquired British broadband provider Virgin Media
in 2013 and Ziggo NV in the Netherlands last year. More
recently, it has gone after sports rights with several content
deals and purchased a stake in U.K. commercial broadcaster ITV
Plc.
In the U.S., Malone’s influence over the Who’s Who of the
media industry has been wide-ranging. He controls companies
including premium cable channel Starz and Sirius XM Holdings
Inc., a satellite-radio company, and sits on the board of movie
studio Lions Gate Entertainment Corp. He’s known for engineering
complicated tax-free spinoffs and financial arrangements that
few can understand.
When asked in November whether Charter would attempt to buy
Time Warner Cable if the Comcast deal failed, Malone said,
“Hell yes.” And as soon as the deal with Comcast evaporated,
Charter immediately contacted Time Warner Cable about possibly
renewing talks, people familiar with the matter have said.
“At first blush, Altice’s interest in Time Warner Cable is
bad news for Charter,” Craig Moffett, an analyst at
MoffettNathanson, wrote in a note Wednesday following first
reports on a takeover bid by Altice. “If Altice can snatch away
Time Warner Cable, Charter is left at the altar. Again.”
For Related News and Information:
The French Billionaire Who Wants to Rule the U.S. Cable Business
Malone Says Liberty, Vodafone Make ‘Great Fit’ in Western Europe
Time Warner Cable Said in Sale Talks With Altice, Charter
Top Media Stories: TOP MED <GO>
--With assistance from Manuel Baigorri and Dinesh Nair in London
and Gerry Smith and Alex Sherman in New York.
To contact the reporters on this story:
Marie Mawad in Paris at +33-1-5530-6290 or
mmawad1@bloomberg.net;
Ed Hammond in New York at +1-212-617-1963 or
ehammond12@bloomberg.net;
Kristen Schweizer in London at +44-20-3525-7526 or
kschweizer1@bloomberg.net
To contact the editors responsible for this story:
Kenneth Wong at +49-30-70010-6215 or
kwong11@bloomberg.net;
Cecile Daurat at +1-302-661-7607 or
cdaurat@bloomberg.net
Kenneth Wong, Jacqueline Simmons