Charter Communications Inc. (CHTR:US) is nearing an agreement to secure $25 billion in debt to help finance an acquisition of Time Warner Cable Inc. (TWC:US), a person with knowledge of the matter said.
The person asked not to be identified because the process is private. Based on that amount of debt, Charter could then offer about $90 per share for the company in cash, according to the amount of Time Warner Cable shares outstanding. Charter’s current market value is about $14 billion.
A financed deal of this size would result in a combined company with more than $63 billion in debt when taking into account Charter and Time Warner Cable’s current balance sheets. Both companies already carry substantial debt.
John Malone, Charter’s largest shareholder with a 27 percent stake through his holding company Liberty Media Corp., has said he’ll maintain an interest of at least 25 percent and likely increase his investment as part of a deal to avoid dilution.
Malone advocates a consolidation strategy for the cable industry to compete better against newer entrants such as Netflix Inc. and Amazon.com Inc.
A deal between Time Warner Cable and Charter would combine the second- and fourth-largest cable companies in the U.S., giving it bigger heft and a better negotiating stance when renewing licenses to carry channels from programmers such as CBS Corp. and Viacom Inc.
Charter has also talked to Comcast Corp., the largest U.S. cable company, about a possible joint bid that would break up Time Warner Cable, people familiar with the matter said last month. Comcast has also considered making a solo offer for Time Warner Cable, as has Cox Communications Inc., the third-largest U.S. cable service.
The Wall Street Journal previously reported that Charter was arranging $25 billion in financing as it pursues an acquisition of Time Warner Cable. Justin Venech, a spokesman for Charter, declined to comment.
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