According to Bloomberg,
Comcast Corp. (CMCSA) and Charter (CHTR) Communications Inc. have discussed a joint bid for Time Warner Cable Inc. that would divide its assets between them, people with knowledge of the matter said.
The talks between Comcast and Charter have been preliminary, and a Time Warner Cable breakup is one option amid several under consideration, said the people, who asked not to be identified because the matter is private. Parts of Time Warner Cable would complement each company’s coverage area, the people said.
Time Warner Cable, the second-largest U.S. cable company, is emerging as an acquisition target amid renewed attempts to consolidate the industry. Companies are looking to bulk up to get more negotiating leverage with networks such as CBS Corp. and Walt Disney Co.’s ESPN. A joint deal would solve issues Comcast and Charter would face if they were to pursue Time Warner Cable separately, the people said.
Breaking up Time Warner Cable would result in a smaller deal for Comcast than buying it outright, thus muting regulatory concerns. Charter wouldn’t need to raise as much money to complete a purchase, making an acquisition more palatable, the people said.
“Everybody wins, but no one wins big,” Vijay Jayant, an analyst with ISI Group, said. “A joint deal also mitigates the risks.”
Justin Venech, a spokesman for Charter, declined to comment on the joint bid talks, as did John Demming, a Comcast spokesman. Bobby Amirshahi, a spokesman for New York-based Time Warner Cable, declined to comment.
Splitting up Time Warner Cable would let Comcast and Charter add users near markets they already serve, making regional advertising more effective, Jayant said. Charter could take Time Warner Cable’s markets in Los Angeles and North Carolina, while Comcast could absorb its New York and Dallas regions, he said.
Joint purchases have helped cable giants grow larger before. Comcast and Time Warner Cable acquired and broke up Adelphia Communications Corp. in 2006, with Time Warner adding 3.3 million customers and Comcast gaining 1.7 million.
Time Warner Cable (Bloomberg)
Comcast has also weighed a solo bid for Time Warner Cable, according to two people with knowledge of the situation. Regulatory obstacles wouldn’t necessarily be insurmountable for such a transaction because the companies don’t overlap in many regions, said one of the people. The two companies have held some talks, though the process is in the early stages, the other person said.
Charter, backed by billionaire John Malone, has been in discussions with banks, including Barclays Plc, Bank of America Corp. and Deutsche Bank AG, to borrow funds for an acquisition, two people familiar with those talks said. Without a partner, Charter would be bidding on a much bigger rival: Time Warner Cable has an enterprise value of $61 billion, compared with more than $28 billion for Charter.
“Comcast has an advantage through sheer size, and they could make an offer that would be far less debt-laden than one from Charter,” Craig Moffett, founder of research firm MoffettNathanson LLC, said in an interview.
Mayura Hooper at Deutsche Bank, Kerrie Cohen at Barclays and Bank of America’s John Yiannacopoulos declined to comment.