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Charter Nears Bank Financing Deal for Time Warner Cable Bid (Report)

John Malone Sun Valley 2011 - H 2013
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John Malone

John Malone, whose Liberty Media owns a 27 percent stake in Charter, has touted the benefits of cable consolidation.

Charter Communications, in which John Malone's Liberty Media owns a 27 percent stake, is in advanced talks with banks about a multibillion-dollar financing agreement for a possible bid for Time Warner Cable, The Wall Street Journal reported Friday, citing sources familiar with the situation.

Wall Street chatter has in recent months repeatedly suggested that Charter, led by CEO Tom Rutledge, could launch a takeover bid for the bigger Time Warner Cable.

STORY: Time Warner Cable CFO Discusses Charter Deal Talk, Netflix

Malone has touted the benefits of consolidation in the cable industry, citing such things as leverage in carriage negotiations with content companies. But observers have mentioned that TW Cable's much bigger market value would pose challenges for Charter. Charter has around 4.2 million pay TV subscribers and a market value of about $13 billion, compared to TW Cable's 11.4 million and about $35 billion.

TW Cable management has been cool to a sale, although CFO Artie Minson earlier this week told an investor conference in Barcelona that the company would put shareholders first regarding any deal considerations, meaning they would have to get adequate value.

Analysts have cited TW Cable's recent operating challenges, such as a big subscriber loss in the third quarter amid a carriage dispute with CBS Corp., as one factor that could lead investors to support a takeover. Rutledge also has a reputation as a savvy operator, while TW Cable is seeing CEO Glenn Britt leaving at the end of the year. He will be replaced by COO Rob Marcus.

A Charter bid for TW Cable has been expected by year's end, but it still isn't a foregone conclusion. The Journal reported that even the timing of such a move remains unclear.

STORY: Liberty Media's John Malone Touts Charter Stake, Cable Power

Analysts have said if the two cable firms merge, it could push others in the cable and related industries to look for deals as well, including a possible new attempt for a merger of satellite TV companies Dish Network and DirecTV.

The Journal said Charter is nearing a multibillion-dollar debt deal with banks that could be part of a TW Cable bid. It said Charter would likely need to raise about $25 billion for the cash component of a deal to satisfy investors.

In addition to the bank debt, Charter would likely offer its own stock in the deal and could raise equity from wealthy individuals or other investors, such as sovereign wealth funds.

Liberty would likely add in cash as part of a deal to avoid diluting its stake in Charter, the Journal also said.