The landscape for the sell-off of Time Warner Cable continues to shift with Cox Communications reportedly joining Comcast and Charter/Liberty Media as a potential suitor.
Citing un-named sources, The Wall Street Journal reported that privately held Cox was considering whether it wanted to join in on the bidding for Time Warner Cable.
Comcast is also kicking the tires amid media reports that it may team up with Charter, which is backed by John Malone’s Liberty Media that owns a 27 percent stake in Charter, or pursue a bid on its own. Charter is the nation’s fourth-largest cable operator.
A spokesman for Cox declined to comment on the speculation that it was interested in pursuing Time Warner Cable, but did reiterate that Cox Communications, which is part of Cox Enterprises, was not for sale. The Wall Street Journal said it wasn’t “clear whether there have been any talks so far” between Cox and Time Warner Cable.
Combining the nation’s largest and second-largest cable operators, Comcast and Time Warner Cable, respectively, may be hard for the Federal Communications Commission and Department of Justice to swallow. Breaking Time Warner Cable up between Comcast and Charter, which would be similar to Comcast and Time Warner Cable divvying up the former Adelphia systems in 2006, might make the deal more palatable.
Previous media reports have said that Time Warner Cable was cool to Charter’s advances and had instead approached its old partner Comcast in regards to a potential deal. Further muddying the waters, The Wall Street Journal reported that Charter/Liberty could team up with Comcast to buy and split up Comcast.
Not likely, according to one industry source.
“There’s the personal conspiracy theory that makes all of this seem possible. Malone has vowed to get back into North American cable,” the source said. “He has to make acquisitions through and beyond Charter to do that. Malone left under bad circumstances and it’s personal for him. He doesn’t particularly like the Roberts after they tried to end-run him with the TCI/Magness stock years ago and (former AT&T CEO and chairman Michael) Armstrong screwed up his plans to call the shots at AT&T, a mess that also involved the Roberts.”
Some analysts have speculated that just about anybody other than the current management team at Time Warner Cable could do a better job of running the company. Banding several of the top-five cable operators in the country together would, in theory, lead to improved technology synergies, such as a Netflix-type video offering, and serve as a better vehicle to deal with increased programming costs.
But back to Cox. Family-owned Cox Communications has been a pioneer in the business services sector and currently has a more robust balance sheet than Charter, the latter of which has finally emerged from the shadow of its bankruptcy in 2009. Other than being sidetracked by the build-out and then abandonment of its own 3G wireless service, Cox Communications, the nation’s third-largest cable operator, generally fires on all cylinders.
Whomever does end up buying Time Warner Cable—wouldn’t it be great if it happened on Black Friday?—will have to fork out a premium since its stock has increased more than 35 percent since June. That may not matter to Malone, who is a master at putting together complicated deals and no doubt has the needed assets already lined up.
Time Warner Cable CEO and chairman Glenn Britt has previously said he wasn’t opposed to consolidation in the cable industry, but cited Time Inc.’s 1990 merger with Warner Communications and the AOL/Time Warner Cable merger in 2000 as deals that favored one side of shareholders over the other. But Britt is stepping down at the end of the year with Rob Marcus, who has a lot of experience on the financial side, taking over next year.
Time Warner Cable’s board will have to sort through the prospective offers, but Marcus probably doesn’t want to miss his chance to run the company after waiting in the wings.
In related merger mania, news, The Los Angeles Times wrote a story yesterday about the regional sports networks that Time Warner Cable owns in regards to their impact on any potential deal.
And what will happen to privately held Bright House Networks, the nation’s sixth-largest cable operator, if Time Warner Cable is sold? Bright House Networks has worked in tandem with Time Warner Cable on the technology front for many years, and piggybacks on the retransmission deals that Time Warner Cable negotiates.
The clock is ticking on the takeover attempts for Time Warner Cable.