Charter share price: Company said to raise$25 billion for Time Warner Cable bid
iNVEZZ.com, Thursday, November 28: Charter Communications Inc (NASDAQ:CHTR) is reportedly arranging finance to help fund the acquisition of Time Warner Cable Inc (NYSE:TWC). Time Warner Cable has been a target for billionaire John Malone, chairman of Liberty Media Corp (NASDAQ:LMCA), Charter’s biggest shareholder, for several months.
In yesterday’s New York trading Charter shares closed down 0.84 percent at $134.98, while Time Warner Cable’s share price was little changed at $136.80. Both Charter’s and TWC’s stock have surged so far this year by 77 percent and 40 percent respectively.
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The Wall Street Journal reported yesterday that Charter, the Connecticut-based company, which is the fourth largest cable operator in the US, is arranging $25-billion in debt financing to help fund the acquisition of the country’s second largest cable company, Time Warner Cable. The newspaper attributed the information to unnamed sources familiar with the matter.
According to the sources, the debt package being put together by Charter would support a cash component of about $90 per share, with the rest likely to be paid in Charter shares. TWC has indicated that it will only seriously consider a premium offer. Its shares have soared since mid-June when Charter’s interest became public, giving the company a market capitalisation of $38 billion as of yesterday’s close. Charter, whose share price has also risen sharply so far this year, was valued at $14 billion.
The substantial debt financing, however, presents a potential hurdle, which could make Time Warner Cable more inclined to accept potential offers from other competitors such as larger cable rival Comsat Corp (NASDAQ:CMCSA) or the US’s number three cable company, Cox Communications. Both Charter and Time Warner Cable already carry substantial debt and the addition of another $25 billion would put the combined company’s debt at about $63 billion.
**Liberty Media stake**
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Charter would also need to issue a significant amount of shares to complete the deal, which would have a heavily dilutive effect on its existing shareholders. With a market capitalisation of around $14 billion, Charter could conceivably have to issue almost the same amount of stock to complete the deal, assuming it raises $25 billion of debt, the WSJ notes.
John Malone’s Liberty Media is the largest shareholder in Charter with a stake of 27 percent. Malone has said that he would maintain an interest of at least 25 percent and likely increase the investment as part of a deal to avoid dilution.
**As of yesterday’s US close buy Charter shares at $134.98**
**As of yesterday’s US close sell Charter shares at $134.98**
**As of yesterday’s US close buy Time Warner Cable shares at $136.80**
**As of yesterday’s US close sell Time Warner Cable shares at $136.80**
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