Netherlands based telecom conglomerate Altice is expected to put in a $185 billion bid for Charter Communications reports FierceCable’s Daniel Frankel.
Charter, the Number Two cable company in the United States is worth $180 billion, including debt, according to Reuters, but that figure excludes any takeover premium.
There is doubt among analysts about whether Altice has the balance sheet necessary to attract Charter shareholders, especially Liberty Broadband, the company’s biggest investor. Altice’s market cap is approximately $23 billion with $22.6 billion in debt.
Analyst Jonathan Chapin led an investor memo from New Street Research that basically questioned if there’s enough value for Liberty Broadband chief John Malone to approve any deal that would force them to relinquish control because of the risk that would come with said deal. Even if Liberty still held the majority of the pro forma equity, that risk may not be worth the reward.
MoffettNathanson analyst Craig Moffett believes Altice is not alone; he stated that other companies rumored to have an interest in acquiring Charter like Verizon and Softbank also lack the balance sheet that would be enticing enough for Charter to bypass their current strategy to just go it alone.
“All this M&A talk is titillating, but isn’t likely to amount to anything,” Moffett said.
All Liberty Broadband chairman Greg Maffei would say about the potential acquisition rumors was that the company would listen to all and any offers that come their way and judge them based on their merit and appeal. He also said any deal that would be appealing to Liberty Broadband and any other Charter stakeholder would not only have to have real value, but also prove its capabilities go beyond what they see is already a company that’s in pretty good shape.
Altice owner Patrick Drahi became interested in making a bid for Charter when Japan’s Softbank attempted to merge Charter with Sprint or buy the company outright, according to a CNBC report.
“Altice management fundamentally believes that U.S. cable…margins should be substantially higher than where they are at currently, which along with a willingness to put high leverage on (Charter) underpins what could be a relatively aggressive bid,” Pivotal Reaserach analyst Jeff Wlodarczak said in an email to Reuters.