Charter Communications could offer $90 in cash for each Time Warner Cable share, and supplement that with its own stock, if it completes the debt offer, The Wall Street Journal reports. The plan is the latest indication that Charter wants to pounce on the No. 2 cable company. Charter’s top shareholder, Liberty Media’s John Malone, is eager to see cable companies consolidate. And TWC is seen as vulnerable due to its unimpressive recent performance — including its loss of 306,000 video subs in Q3 when CBS went dark for 32 days — as well as the plan by long-time CEO Glenn Britt to retire at year end. The additional debt could strain Charter: It already has $14B in IOUs, equal to five times its cash flow, while TWC has $24B. And a $90 cash offer wouldn’t be sufficient. TWC closed today at $136.80, +13.2% over the last five days amid the reports that suggest the months of talk about a possible take-over effort might soon result in a hard offer — if not from Charter then possibly from Comcast or Cox. A buyer probably would have to offer at least $150 a share, analysts say. And there’s no guarantee that TWC would accept an offer from Charter that included so much debt. “If synergy or operating improvement forecasts were not to play out, or if the market were to give back some of its recent gains, or if the regulatory climate were to experience a sudden chill, a cable stock levered at such levels could get annihilated,” MoffettNathanson Research’s Craig Moffett said last week.
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