Time Warner Cable Inc (TWC), Cablevision Systems Corporation (CVC): Hedge Fund Billionaire John Paulson Thinks These Companies Are Takeover Targets

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Moody’s Senior VP Neil Begley has argued that Time Warner Cable could consider a defensive acquisition, itself acquiring Charter Communications, Inc. (NASDAQ:CHTR) to stave off a leveraged buyout.

Alternatively, Begley believes that Time Warner could purchase Cablevision or Cox Communications, becoming large enough in the process to prevent a Charter bid.

(Unfortunately for would-be investors, Cox Communications is privately held.)

Investing in the cable sector

Given all the chatter, it would be unusual if nothing takes place. At this point, it seems clear that, barring regulatory intervention, the cable industry is about to consolidate. As with the telecom sector over the last year, investors who take stakes ahead of a buyout could profit.

Based on reports over the last few weeks, Time Warner Cable Inc (NYSE:TWC) seems the most likely to be acquired. John Malone is moving aggressively to raise the financing needed for a bid, and that could benefit Time Warner shareholders.

However, Time Warner bondholders would lose out, as the subsequent company would be saddled with a tremendous amount of debt. To prevent that, Time Warner’s management could buy Charter Communications, Inc. (NASDAQ:CHTR) before Charter buys it.

Time Warner could also buy Cablevision, making itself too large to acquire. Or, if Malone can’t get the funds to buy Time Warner, Charter could buy Cablevision instead.

All three stocks have done great over the last month, rallying 7% (Charter), 14% (Time Warner), and 27% (Cablevision). But should the companies merge or be acquired, further upside is possible.

The article Hedge Fund Billionaire John Paulson Thinks These Companies Are Takeover Targets originally appeared on Fool.com is written by Salvatore “Sam” Mattera.

Joe Kurtz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Salvatore “Sam” is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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