Originally published: February 14, 2014
Last updated: March 5, 2014 - 2:28am
Comcast and Charter Communications have been battling each other for months to buy Time Warner Cable and Comcast won. Losing hurts. Charter shares fell 6% as the company finds itself backed into a defensive position. The cable business is tough. A flood of content available over the Internet has hit video subscriptions hard. Charter knows that as well as anyone, which is why it was fighting for TWC in the first place. At this point, survival hinges on mergers designed to build economies of scale, secure better financing, and carry more clout when negotiating with the cable networks. “The new super MSO [multi-system operator] also dictates further consolidation and more deals. The only possible way that Charter and Liberty Media could plausibly mount a counterbid is with an epic strategic investment from a major San Francisco or Seattle tech company,” according to a note from Wunderlich Securities analysts. Liberty Media, with a 27% stake, is Charter’s biggest shareholder. John Malone, Liberty’s billionaire chairman, is a fervent advocate of industry consolidation. So is Charter CEO Thomas Rutledge.
Assuming no epic strategic investments are in the works, what are Charter’s options? The word on Wall Street is that a bid for Cox Communications might be high on the list. There’s no immediate benefit to investors from this scenario, however. Cox Communications is privately owned. If it were public, you can bet its stock would be up on takeover speculation.