TWC stock has big gains sitting in front of it as suitors line up in a bidding war to acquire Time Warner Cable Inc. (NYSE: TWC).
For long-term investors in Time Warner Cable stock, a good thing keeps getting better. TWC stock is up 20% over the past year and 79% over the past two years.
Now TWC shareholders are looking at gains of anywhere from 15% to 35%, depending on which company succeeds in pulling off the deal.
Trading today (Friday) at about $170 a share, TWC stock is already beyond several earlier bids. Analysts now estimate that it will take a bid from between $190 to $230 a share to win Time Warner's heart.
And make no mistake. The allure of Time Warner, the No. 2 cable operator in the United States, is so high that a merger deal is inevitable.
"With Time Warner Cable you have a known price tag," Roger Entner, CEO of Recon Analystics, told The Street. "You also have a profitable company that's executing well and doesn't have significant problems. This isn't a turnaround case."
That's why the No. 1 cable operator, Comcast Corp. (Nasdaq: CMCSA) tried so hard to buy TWC.
This Is Why TWC Stock Keeps Rising
In the 14 months following the announcement of Comcast's intent to buy Time Warner Cable, the New York-based company got leaner. It's profitable and enjoying growth in its subscriber base. And not only does TWC control 20% of the U.S. market, it has a large presence in the top two cities, New York and Los Angeles.
The $45.2 billion Comcast deal fell apart a month ago when it became clear that U.S. regulators, primarily the Federal Communication Commission (FCC) were unlikely to approve it over concerns the resulting company would be overwhelmingly big and powerful.
That's created an opportunity for other would-be buyers. Almost daily reports of suitor interest in Time Warner Cable has pushed TWC stock up 9% just in the past week.
Here's a look at each of the companies in the hunt for TWC - along with its chances of being the one that walks away with the prize...
Handicapping the Time Warner Cable Sweepstakes
The top two contenders trying to make a deal for TWC are St. Louis, Mo.-based Charter Communications Inc. (Nasdaq: CHTR) and Luxembourg-based Altice SA (AMS: ATC) - but they have a lot of company.
TWC Potential Dealmaker No. 1: Cablevision Systems Corp. (NYSE CVC) - Bethpage, N.Y.-based Cablevision isn't exactly a suitor; CEO James Dolan has hinted that Time Warner Cable buy his company. He'd like to merge Cablevision's New York customer base with TWC's to make it easier to distribute technologies such as Wi-Fi everywhere. But there's not much benefit for TWC. And the FCC would certainly frown upon reduced competition in the New York market. There's almost zero chance of a TWC-Cablevision pairing.
TWC Potential Dealmaker No. 2: Softbank Corp. (OTCMKT: SFTBF) - Softbank, a Japanese company, already owns Sprint. It tried and failed to buy T-Mobile U.S. Inc. (NYSE: TMUS) last year. But Softbank founder Masayoshi Son is still thought to covet the idea of owning a broadband business in the U.S. that would augment Sprint's mobile offerings. As a Japanese company, Softbank may face more regulatory hurdles than a U.S. company. But it has the financial resources to make a strong bid for Time Warner cable. A long shot, but not impossible.
TWC Potential Dealmaker No.3: Deutsche Telekom AG (OTC: DTEGY) - The story of Germany's Deutsche Telekom is almost identical to that of Softbank. Deutsche Telekom owns T-Mobile and would like to have a broadband service to pair with it. And like Softbank, Deutsche Telekom is a telecom giant with the ability to make a big acquisition like TWC. And as a foreign company, Deutsche Telekom would face challenges. Another long shot, but with odds about equal to Softbank's.
TWC Potential Dealmaker No. 4: Altice SA - Altice made headlines this past week with the $9.1 billion purchase of the No. 7 U.S. cable company, privately held Suddenlink Communications. Surprisingly, CEO Dexter Goei immediately signaled his intention to make more moves in the U.S. cable market. Suddenlink would represent 12% of Altice's business; it wants its U.S. operations to be 50% of its business. Reuters reported today that Altice was already seeking funding for a Time Warner Cable acquisition. Money is Altice's biggest challenge, as its $30 billion market cap is well below the amount it would take to buy TWC. But Altice has built a reputation in Europe for using leverage to make deals. Altice also faces regulatory challenges as a foreign-based company. But the company is already making aggressive moves. Altice has a fair chance of pulling off a deal on sheer willpower.
TWC Potential Dealmaker No. 5: Charter Communications - Charter's market cap of just under $20 billion means a deal for Time Warner Cable will involve some fiscal magic, but it can be done. Charter has the huge advantage of being Time Warner Cable's top choice for a merge partner. The companies are known to be in friendly talks. And Charter is in the process of taking over another cable provider, Bright House Network. The combination of all three would create a No. 2 cable provider close to the size of Comcast. But the clincher is that FCC Chairman Tom Wheeler reached out to both companies yesterday to assure them that the agency did not object to cable deals. Hint-hint. Charter is the clear favorite in the TWC sweepstakes. And we could see a deal announced in a matter of weeks, if not days.
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David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.