By Shalini Ramachandran
Comcast Corp. is much more likely to work with Charter
Communications Inc. on a bid for Time Warner Cable Inc. than to
pursue an offer on its own, said a person familiar with the
situation, a major boost to Charter's hopes of winning the takeover
battle.
Comcast's current thinking reflects its unwillingness to pay
Time Warner Cable's stated asking price of $160 a share as well as
Time Warner Cable's disinterest in selling off just some of its
systems piecemeal, the person said.
In contrast, Charter has signaled to Comcast in meetings that,
if Charter succeeded in acquiring Time Warner Cable, it would be
willing to give up TWC's prize New York-area cable systems to
Comcast in exchange for Comcast's endorsement of its bid, said the
person.
Charter CEO Tom Rutledge hinted at that stance at a private
investor dinner on Thursday, say other people familiar with the
situation. Getting the New York systems would be a major victory
for Comcast, strengthening its hold on the northeastern U.S.
Comcast already dominates Philadelphia and serves part of the New
York suburbs.
It would also position Comcast as the most likely bidder for
Cablevision Systems Corp., the other major New York-area cable
operator that has long been seen as a takeover candidate.
Comcast's shift in thinking comes nearly two weeks after Charter
disclosed publicly, for the first time, the takeover offers it has
made in recent months for TWC, each so far rejected as being too
low. Charter's most recent offer was $132.50 a share, valuing Time
Warner Cable at $37.4 billion; Time Warner Cable shares were at
$133.70 in 4 p.m. trading on Friday.
Publicly, executives of Charter and its biggest shareholder,
Liberty Media Corp., have spent the past couple of weeks trying to
win TWC shareholder support for its bid. Privately, however,
Charter and Liberty have been trying to persuade Comcast to endorse
its offer, rather than make its own bid, say people familiar with
the situation.
Comcast and Charter have had "substantive dialogue" about
working together on a possible Time Warner Cable deal, say other
people familiar with the situation. Under one scenario being
discussed, Comcast wouldn't help finance Charter's bid, the person
said. But the two companies would agree beforehand on carving up
Time Warner Cable's systems once the acquisition was completed, the
person said.
A Charter spokesman said its bid for Time Warner Cable is a
"stand-alone bid" that "doesn't rely on or require any outside
participation."
Comcast posed a major threat to Charter's hopes. Not only does
Comcast have a stronger balance sheet, making financing a deal
easier, but Time Warner Cable had reached out to Comcast last year
about a possible deal, a sign that it preferred a merger with
Comcast than Charter.
But Comcast, the biggest cable operator, likely also faced much
tougher regulatory hurdles than Charter.
The big question now is whether Charter can negotiate a deal
with TWC or whether Charter and Liberty will have to mount a proxy
fight at this spring's annual TWC shareholder meeting to get
control of the board.
UBS Securities analyst John Hodulik said in a research note
Friday that "our own interaction with investors suggests there
would be solid support for a deal in the $145 range."
Both Comcast and Time Warner Cable are due to report fourth
quarter earnings next week, which will likely focus attention on
TWC's operational performance. The cable operator has lagged behind
others in the industry, particularly Comcast, in subscriber
retention. Comcast has already disclosed that it gained video
subscribers in the fourth quarter, the first time in 26 quarters.
Comcast CEO Brian Roberts has scheduled a series of investor
meetings next week as part of an annual road show.
Write to Shalini Ramachandran at
shalini.ramachandran@wsj.com
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