Comcast, Charter Said to Near Pact on Time Warner Cable Assets

Comcast Corp. is near a deal to buy New York City, North Carolina and New England cable assets from Charter Communications Inc. if shareholders approve Charter’s takeover bid for Time Warner Cable Inc., people with knowledge of the matter said.

The asset sale would be contingent upon Charter’s acquisition of Time Warner Cable, which could still fall through, said the people, who asked not to be named because the negotiations are private. Charter has offered $132.50 per share for Time Warner Cable, valuing the cable company at $37.4 billion excluding debt. Time Warner Cable has rejected the proposal, calling it “grossly inadequate.”

An agreement with Comcast would give Charter more funds as well as remove a potential competitor in its attempt to acquire Time Warner Cable. It also may strengthen the fourth-largest U.S. cable provider’s efforts to persuade Time Warner Cable’s shareholders to accept a deal because Comcast won’t enter the fray and top its offer. Still, most Time Warner Cable shareholders are demanding a bid of more than $140 a share, people familiar with the matter have said.

“The news that Comcast and Charter are close to a deal to join forces in a bid for TWC is genuinely a game-changer,” Craig Moffett, an analyst at New York-based MoffettNathanson LLC, wrote in a note to clients. “It would remove the prospect of a white knight bid from Comcast” and it “increases the probability that Time Warner Cable’s board would enter into constructive negotiations.”

$16 Billion

Comcast and Charter have a framework agreement on what Comcast would pay for those three cable markets, said one of the people, though that number will depend on what Charter pays for Time Warner Cable. Time Warner Cable has about 3 million subscribers in those markets, another person said.

Charter paid $1.63 billion last year for Cablevision Systems Corp.’s Optimum West assets, about $5,345 per subscriber, according to data compiled by Bloomberg Industries. At the same per-subscriber value, Time Warner Cable’s customers in those markets would be worth about $16 billion.

John Demming, a spokesman for Comcast, declined to comment, as did Susan Leepson, a spokeswoman for Time Warner Cable and Justin Venech, a spokesman with Charter.

Larger Swaths

Comcast operates in 39 states including New Jersey, Massachusetts, Connecticut and the Carolinas. The Philadelphia-based company is interested in Time Warner Cable’s markets that abut its current operations, said two of the people with knowledge of the matter. Acquiring those assets would give Comcast opportunities to cut costs and sell programming and advertising to larger swaths of people.

Charter would sell the markets to Comcast to raise cash after borrowing about $20 billion to finance a deal for Time Warner Cable, four of the people said.

Comcast climbed less than 1 percent to $52.49 yesterday in New York, while Charter jumped 4.2 percent to $136.92. Time Warner Cable dropped less than 1 percent to $133.45, giving it a market capitalization of $37.6 billion.

Comcast’s support of Charter’s bid shows the strong relationship of Liberty Media Corp. Chairman John Malone and Comcast Chief Executive Brian Roberts, two of the people said. Malone’s Liberty owns about 27 percent of Charter. Malone and Roberts both want to invest in further consolidation of the industry to benefit from scale advantages, including increased pricing power with networks and shared rollouts of technology.

The asset sale is not a joint bid with Charter and won’t affect Charter’s strategy to acquire Time Warner Cable, the people said. Comcast is not involved in any of Charter’s plans other than the asset sale, two of the people said.

Charter plans to nominate a slate of directors to sit on Time Warner Cable’s board in early-to-mid February and is considering making a direct tender offer to shareholders at that time, according to people familiar with the Stamford, Connecticut-based company’s plans.

Charter is in the process of selecting the directors, according to one of the people.