Time Warner Cable Inc (TWC), Charter Communications, Inc. (CHTR): How to Play the Potential Cable M&A Deal

Page 1 of 2

Time Warner Cable Inc (NYSE:TWC)

Recently, Time Warner Cable Inc (NYSE:TWC) has been trading higher on rumors rumor that billionaire John Malone, through Charter Communications, Inc. (NASDAQ:CHTR) would like to take over Time Warner Cable Inc (NYSE:TWC). Charter Communications, Inc. (NASDAQ:CHTR) has also been on the rise after the rumor, climbing from $117.80 per share to as high as $130. If that happens, in the long run, a lot of synergies and benefits will eventually flow to John Malone’s powerhouse, Liberty Media Corp (NASDAQ:LMCA), the 27% stake owner of Charter Communications, Inc. (NASDAQ:CHTR).

Charter Communications, Inc. (NASDAQ:CHTR) to acquire Time Warner Cable Inc (NYSE:TWC)?

Time Warner Cable Inc (NYSE:TWC) is one of the biggest video, high-speed data and voice services providers in the U.S., serving around 15.2 million customers, including 14.7 million residential services customers and 563,000 business services customers. Most of its revenue, $18.18 billion, or 85% of the total, was derived from residential services, while the business services and advertising segments generated only $1.9 billion and $1 billion, respectively, in 2012 sales. In the residential services, the company generated as much as $10.9 billion in Video. High-speed data ranked second with more than $5 billion in 2012 revenue.

Many people have been concerned about the potential synergies between Time Warner Cable Inc (NYSE:TWC) and Charter Communications, Inc. (NASDAQ:CHTR). While Time Warner Cable Inc (NYSE:TWC) concentrates operations in five main areas including New York State, the Carolinas, the Midwest, Southern California and Texas, Charter Communications, Inc. (NASDAQ:CHTR) spreads out across 25 states, with eleven key markets including Michigan, Alabama/Georgia, Michigan, California and Central States. However, it could be a cable industry consolidation deal with potential synergies in both operations and cost savings. Like Time Warner Cable, Charter Communications also derived as much as 48% of its revenue from Video while Internet contributed nearly $1.87 billion, or 25% of total sales in 2012.

If Charter Communications acquired Time Warner Cable, it would have to use a lot more outside equity or debt financing, as it is much smaller than Time Warner Cable. While Time Warner Cable is worth more than $32.7 billion on the market, with 12 million video subscribers, Charter Communications has only four million subscribers, with a market cap of only $12.9 billion. Both Charter Communications and Time Warner Cable had a large amount of debt and quite thin equity. The combined company would be likely to have $37 billion in debt and only around $7 billion in equity. According to Moody’s, John Malone might want to limit his dilution, so the financing for the deal would make the credit risk for bondholders riskier. If John Malone used debt financing for this acquisition, the combined company’s total debt could reach a whopping amount of about $60 billion.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

On the Move: The 10 Fastest Growing Businesses in 2015

Fast Money: The 10 Highest Paying Fast Food Restaurants

Mixing It Up: The 14 Best Music Mashups of 2014

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!