It Begins: Charter Said to Prepare Offer for Time Warner Cable

The Cable Industry Seeks Consolidation to Better Negotiate With TV Networks

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Charter Communications Inc. is preparing an offer letter to acquire Time Warner Cable for less than $140 a share, according to a person with knowledge of the matter.

A CBS ad attacking Time Warner Cable during their battle this year
A CBS ad attacking Time Warner Cable during their battle this year

Charter will send the so-called "bear hug" letter to Time Warner Cable as early as next week, according the person, who asked not to be identified because the negotiations are private. The offer will include cash and Charter stock, the person said.

It's called a bear hug letter because it offers a significantly higher price than a company's shares are worth. They typically come when it's unclear whether management of the targeted company is interested in selling.

Time Warner rose 1% to $132.37 as of 10:39 a.m. in New York today. The shares have gained 35% this year through yesterday on speculation that a takeover bid is coming. Charter gained 2% to $134.99 today.

Charter, the fourth-largest U.S. cable company, is attempting to buy Time Warner Cable, the second-largest U.S. cable provider, to gain leverage in future programming discussions with TV networks. Time Warner Cable itself could have used more leverage as it tried to negotiate a new deal to carry CBS earlier this year, resulting in a long blackout and the defection of cable subscribers.

Time Warner Cable, would probably accept a bid of $150 to $160 a share, a person familiar with the matter said earlier this month.

Comcast Corp., the largest cable provider, is not part of Charter's offer, the person said. Comcast, which had discussed a joint-deal that would have it split up the assets with Charter, is monitoring Charter's moves, another person said.

Alex Dudley, a spokesman for Charter, declined to comment as did John Demming, a spokesman for Comcast.

~ Bloomberg News ~

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