Charter To Raise $25B For Potential Time Warner Cable Bid

Charter To Raise $25B For Potential Time Warner Cable Bid
By Warp3 [Public domain], via Wikimedia Commons

Charter Communications, Inc. (NASDAQ:CHTR) is reportedly in talks with banks to raise $25 billion in cash as it looks to acquire Time Warner Cable Inc (NYSE:TWC).

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The amount of debt indicates Charter could offer about $90 per share for the company in cash.

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Charter pursuing Time Warner Cable takeover

As reported earlier, Charter Communications, Inc. (NASDAQ:CHTR) is pursuing a takeover bid for Time Warner Cable. John Malone, chairman of Liberty Media Corp (NASDAQ:LMCA), initiated a deal between Charter and Time Warner Cable. Malone aims to regain his status and shake up the cable industry as Cable King. Liberty Media owns a 27% stake in Charter Communications.

Citing known sources, Ed Hammond and Emily Steel of Financial Times report that Charter has been in talks about debt financing for the deal with banks including Barclays, Deutsche Bank, Goldman Sachs and JP Morgan. The discussions with the banks have reportedly been in progress since July.

Charter Communications, Inc. (NASDAQ:CHTR) needs to raise substantial funds to swallow Time Warner Cable, which had a market capitalization of $38.6 billion based on Wednesday’s closing price of $136.80 a share, while Charter has a market value of $14.1 billion.

Combined debt of $63 billion

According to Alex Sherman and Edmund Lee of Bloomberg, a financed deal of this size would result in a combined company with over $63 billion in debt when considering Charter and Time Warner Cable Inc (NYSE:TWC)’s current balance sheets. Interestingly, both the companies already carry substantial debt.

A deal between Time Warner Cable and Charter would combine the second and fourth-largest cable companies in the U.S., giving it bigger heft and a better negotiating stance when renewing licenses to carry channels from programmers such as CBS Corporation (NYSE:CBS) and Viacom, Inc. (NASDAQ:VIAB).

Time Warner Cable rejected Charter Communication’s initial proposal, and it recently indicated that it would conduct a thorough evaluation of any proposal before entering into a final agreement with any entity.

Comcast Corporation (NASDAQ:CMCSA), the largest cable company in the country, is also considering the possibility of submitting an acquisition proposal for Timer Warner Cable or supporting Charter Communication’s bid.

However, observers in the cable industry believed regulators might object Comcast’s merger with Time Warner Cable Inc (NYSE:TWC) because of its leading position in the industry.

Cox Communications, the third largest cable operator in the United States, is also reportedly considering submitting its own proposal or joining other entities to acquire Time Warner Cable Inc.

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Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports
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