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 Top cable provider Comcast is also considering whether it could buy
some selective Time Warner Cable markets, or team up with another
cable company besides Charter Communications Inc to bid for all of
Time Warner Cable, the people said.
Besides Comcast and Charter, privately held Cox Communications Inc
also has interest in a potential deal involving Time Warner Cable,
people familiar with the matter have previously said.
Comcast, which has a market capitalization of roughly $127 billion,
could ultimately decide not to do any deal, said the people, who
asked not to be named because they were not authorized to speak with
media organizations.
A full takeover of Time Warner Cable makes sense because the company
has geographic markets complementary to Comcast, while taking on a
partner would give them opportunity to pick and choose key markets,
one of the people said. Analysts say buying all of Time Warner Cable
would also face tough regulatory scrutiny.
Comcast is weighing all three options equally at this point and
would wait to see what kind of offer Charter comes up with before
pursuing any one of the options, the person added.
Comcast is being advised by JPMorgan Chase & Co on a potential deal
for Time Warner Cable, Reuters previously reported.
Representatives for Comcast and Time Warner Cable declined to
comment.
The potential entry of Comcast into a still-developing bidding war
could complicate months-long efforts by Charter and its largest
shareholder, Liberty Media Corp, to acquire Time Warner Cable.
Charter, the No. 4 cable player in which Liberty Media owns a 27
percent stake, is preparing to send an offer letter for Time Warner
Cable as soon as this week, valuing the larger rival at below $135
per share, Reuters reported on Friday.
But it remains unclear whether the expected cash and stock bid from
Charter, which would provide little premium to Time Warner Cable's
current trading prices, would gain traction with the larger rival's
shareholders or its management. Charter has a market value of $13
billion, which is much smaller than Time Warner Cable's $37 billion
market value.
Shares of Time Warner Cable ended 0.6 percent higher at $132.09 on
the New York Stock Exchange on Monday. Any bid would need to be at
least $150 per share to be considered seriously by the company's
board, a person familiar with the company's thinking previously
said.
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DENVER SHAREHOLDER MEETING
Liberty Media's Chairman John Malone and its Chief Executive Officer
Greg Maffei met with some of Time Warner Cable's largest
shareholders in Denver last week and pitched the merits of a
combination with Charter, other people familiar with the matter
said.
Attendees at the meeting included representatives from the hedge
fund Paulson, as well as institutional investors such as Dodge &
Cox, Capital Research and Wellington. A spokesman for Dodge & Cox
declined to comment while representatives from the other
shareholders as well as Liberty Media did not respond to requests
for comment on the meeting.
Some of the shareholders, however, told the executives that they
would not entertain a deal without a substantial premium, some of
the people said.
One of the Time Warner Cable shareholders in attendance, for
example, said they would not be interested in doing a deal for less
than eight times Time Warner Cable's 2013 earnings before interest,
taxes and amortization (EBITDA), the people said. A deal at that
multiple would imply a bid price above $140.
Time Warner Cable is currently trading at 7.6 times its 2013 EBIDTA,
while Charter is trading at 9.5 times, according to Brean Murray
analyst Todd Mitchell.
Charter's multiple is viewed as inflated because it trades more
richly than the less than seven times multiple of Comcast's cable
unit, which is the most well-regarded cable operator by investors,
Mitchell said.
Malone is also gearing up for a potential proxy fight at Time Warner
Cable's annual meeting next year and held internal discussions about
drafting a list of directors, according to a report in Bloomberg
citing a person familiar with the situation.
A representative from Charter declined to comment about the proxy
fight while a representative from Liberty Media did not immediately
respond to a request seeking comment.
(Reporting by Liana B. Baker, Soyoung
Kim and Nicola Leske in New York; editing by Gary Hill, Ken Wills
and Lisa Shumaker)
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