Charter Communications, the fourth largest MSO in the country, is about to "offer cash and stock, in a so-called bear-hug letter to Time Warner Cable as early as next week," according to a person with knowledge of the matter who asked not to be identified because the negotiations are private, Alex Sherman reports for Bloomberg.
The offer will be "less than $135 per share," the article notes, adding, "Time Warner rose less than 1 percent to $131.41 at the close [of the stock market today, Friday, Dec. 13, 2013,] in New York. The shares have gained 35 percent this year on speculation that a takeover bid is coming. Charter fell less than 1 percent to $131.54."
One analyst told Bloomberg that the cash component of the offer could be about $96 per share.
The definition of a "bear hug," according to Investopedia, is "An offer made by one company to buy the shares of another for a much higher per-share price than what that company is worth. A bear hug offer is usually made when there is doubt that the target company’s management will be willing to sell."
The article also says that "Time Warner Cable is still expanding its residential Internet and phone businesses, and business services revenue is set to double over the next four or five years, according to the company’s forecast. The New York-based company would probably accept a bid of $150 to $160 a share, a person familiar with the matter said earlier this month."
The story notes that "Time Warner Cable lost more video subscribers than any other major cable company in the most recent quarter, dropping 304,000 customers in the period, according to data compiled by Bloomberg. While a dispute with CBS added to the losses, that compares with a loss of 27,000 video subscribers at Charter and 129,000 fewer video customers at Comcast Corp. in the same period."
The article adds that "A bid of $135 a share would value Time Warner Cable at about $62 billion, including the value of its debt. That’s about 7.5 times estimates for its 2014 earnings before interest, taxes, depreciation and amortization of $8.24 billion, data compiled by Bloomberg show. Charter currently trades at a multiple of 8.7 times estimated 2014 Ebitda, while Comcast fetches 7.5 times, the data show."