Merger and acquisition rumors continue to swirl in the cable industry, with reports emerging over the weekend that Charter Communications is preparing a bid for Time Warner Cable.
The offer would value TWC at $135 per share, according to a Reuters report. TWC has been the subject of a series of takeover rumors that have intensified in the run up to nomination to seats on the company's board, which are integral to attempts to purchase companies.
Comcast has also been recently named as a prospective suitor for TWC, however there are some questions over whether regulators would allow the first and second-largest cable companies in the U.S. to unite.
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Netflix, cord cutters, Aereo, phone company ventures like Verizon Fios and streaming set-top boxes like Apple TV have called into question the business models of traditional cable companies. The model is not broken quite yet — TWC brought in $5.5 billion and turned a $532 million profit in the third quarter. But the company's most recent earnings were clouded by a faster-than-expected customer decline along with a high-profile battle with CBS over retransmission fees.
The company has remained tight-lipped about any possible deal, however Rob Marcus, Time Warner Cable chief operating officer, did not rule anything out when speaking at a recent conference held by UBS.
"I'll say what I always say about M&A. Whether or not Time Warner Cable will participate in M&A is and always has been, whether it's as a buyer or a seller, 100% driven by what's in the best interest of our shareholders," Marcus said.
A merger with Charter (or Comcast for that matter) would solve both these issues, at least in the near term. The newly formed company would have a larger subscriber base, some redundant costs that could be trimmed, and more leverage to negotiate with content providers.
The prospective offer has been termed a "bear hug" by some outlets, a term that is associated with deals that pay a large premium compared to the current share price to a company that is believed to be ready to sell. However the $135 price is only slightly higher than the $132 share price that TWC has traded around since late November.
Both Time Warner Cable and Charter Communications declined comment.
Image: Getty/Michael Strider
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