Time Warner Cable Inc. (TWC:US) shares rose the most in four years on a report that Chief Executive Officer Glenn Britt had spoken with Liberty Media Corp. (LMCA:US) CEO Greg Maffei about being acquired by Charter Communications Inc. (CHTR:US)
Time Warner Cable, the second-largest U.S. cable operator, climbed 8.1 percent to $103.93 at the close in New York, the biggest one-day gain since April 2009. Charter, which ranks No. 4 in the industry, gained 5.2 percent to $116.61. Cablevision, the fifth-largest company, rose 3.6 percent to $14.68.
The stocks climbed after CNBC reported Time Warner Cable discussed merging with Charter, which is partially owned by Liberty Media. Though CNBC said Time Warner Cable isn’t likely to pursue the deal, the news signaled to investors that consolidation may be in the works. The idea of using mergers to help combat escalating programming costs was a topic of conversation at an industry conference this week, said Amy Yong, an analyst at Macquarie in New York.
“Coming out of the cable show, the theme was industry consolidation,” Yong, who has the equivalent of a buy rating on Time Warner Cable, said in an interview. The prospect of mergers and acquisitions is “important for this sector,” she said.
Liberty Media, controlled by billionaire John Malone, announced it was buying a 27 percent stake in Charter in March. Malone said earlier this month he wanted Charter to be “a horizontal acquisition machine” and was interested in both smaller and larger U.S. cable deals.
Malone has a history of rolling up cable companies. He built Tele-Communications Inc. into one of the largest pay-TV companies in the 1970s and 1980s, before selling it in 1999.
Time Warner Cable, based in New York, isn’t interested in being acquired by Charter, a smaller company, CNBC said. Charter, based in Stamford, Connecticut, with about 4 million video customers and a market valuation of $11.8 billion. Time Warner Cable has about 12 million TV subscribers and a market capitalization of $30.2 billion.
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