By Gillian Tan and Shalini Ramachandran
Charter Communications Inc. is in early talks with banks to
arrange a debt package of $25 billion to $30 billion, as it pursues
a merger with fellow cable operator Time Warner Cable Inc., people
familiar with the matter say.
Charter is pursuing a friendly transaction with Time Warner
Cable, after its offer last year was rejected and a hostile
approach backfired. Charter has a second chance since Comcast
abandoned its $45 billion merger with Time Warner Cable last month,
and top executives close to Charter wasted little time in starting
to reach out to Time Warner Cable management about an alternate
transaction.
Meanwhile, Charter and Time Warner Cable each have approached
smaller operator Bright House Networks about acquiring the company,
people familiar with the matter have said.
The biggest hurdle of a Charter-Time Warner Cable deal, aside
from the regulatory climate, is price.
In January 2014, Charter had proposed a takeover of Time Warner
Cable at $132.50 a share in cash and stock. Before the ill-fated
Comcast deal was struck, Time Warner Cable rejected Charter's
proposal and said it would only be willing to accept $160 a share,
with $100 in cash. Time Warner Cable shares closed Friday at
$154.68.
The Wall Street Journal has reported that people close to
Charter have made it clear the company doesn't want to make the
mistake again of a lowball bid. They also said Charter is aware it
will have to offer a significant portion of its bid in cash to
satisfy Time Warner Cable's concerns about whether Charter stock is
overvalued thanks to deal speculation.
Tom Eagan, an analyst at Telsey Advisory Group, said recently
that if Time Warner Cable increased its asking price to $170 or
$180 a share, that would greatly increase the debt of the combined
company to "above the comfort level of some investors."
As Charter works with banks to line up the financing to make a
new run at Time Warner Cable, its largest shareholder is also
waiting in the wings to help out.
Liberty Broadband Corp. Chief Executive Greg Maffei said on
Friday he plans to maintain Liberty's 25% voting stake in Charter
in any transaction, and the company has a wide range of ways to
raise capital to maintain the stake.
And if Charter needs to raise even more capital, Mr. Maffei said
many potential partners have expressed interest in investing
alongside Liberty.
Access Investor Kit for Charter Communications, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US16117M3051
Access Investor Kit for Comcast Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US20030N1019
Access Investor Kit for Comcast Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US20030N2009
Access Investor Kit for Time Warner Cable, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US88732J2078
Subscribe to WSJ: http://online.wsj.com?mod=djnwires