Comcast (CMCSA) could team with French telecom Altice Group (ATUS) to acquire Charter Communications (CHTR), speculates Citigroup in a report.
Comcast and Altice would carve up Charter if the joint bid is successful, says Citigroup. Comcast would gain the former Time Warner Cable assets while Altice would get the remainder, says analyst Michael Rollins in the report.
Altice is readying a bid for Charter, the No. 2 U.S. cable TV firm behind Comcast, according to reports that surfaced last week.
Charter’s biggest shareholder is John Malone’s Liberty Broadband (LBDRA). Analysts have cast doubt on Altice’s ability to finance a deal for Charter, which has a market valuation of over $100 billion.
Our M&A math assumes Charter would receive $450 per share comprised of around $220 in Comcast stock, $150 in cash and $80 in Altice USA (ATUS) equity,” said Rollins in the report. “These terms are consistent with Dr. Malone’s stated desire to not own a large, illiquid slug of Altice USA’s stock.”
Federal regulators thwarted Comcast’s proposed acquisition of Time Warner Cable in early 2015. Charter then swooped in and acquired TWC.
Shares in Charter have soared in 2017 — spurred on by reports over the months that Verizon Communications (VZ), Sprint[ticker symb=S]-owner SoftBank Group and now Altice are interested in buying it.
Charter Communications rose 1.7% to close at 401.08 on the stock market today. Comcast gained 1.9% to 41.90 while Altice slipped 0.5% to 31.34.
Malone’s Liberty Broadband owns a 20% in Charter, holds voting rights and has two board members.
In May, Comcast and Charter formed a pact to sell wireless phone services.
“Perhaps the wireless agreement between Comcast and Charter isn’t designed to facilitate cable / wireless M&A at all,” added Rollins. “What if the wireless agreement is a standstill, of sorts, designed to prevent wireless-cable combinations.”
IBD’S TAKE: Comcast stock has climbed 18% in 2017. Comcast has formed a cup chart pattern and is approaching a buy point of 42.28. Comcast split its stock 2:1 earlier this year. Learn more at IBD Stock Checkup.
If Altice is looking for a partner to bid for Charter, Sprint-owner Softbank looms as another possibility.
Altice founder Patrick Drahi, much like Malone and Softbank founder Masayoshi Son during their business careers, has used debt-fueled deals to build up Altice. Altice owns French wireless firm SFR and much more.
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