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TheStreet Open House

Time Warner Cable Ripe for Activists as Paulson Builds Stake

NEW YORK (TheStreet) -- Struggling cable giant Time Warner Cable (TWC) is ripe for an activist investor as speculation mounts that the company could draw merger and acquisition offers from competitors such as Charter Communications (CHTR) and Comcast (CMCSA).

Already, there are signs that vocal hedge fund investors have taken notice of speculation surrounding a possible Time Warner Cable takeover. During the third quarter, hedge fund Paulson & Co. built a four million share stake in the company, or approximately 1.42% of Time Warner Cable's outstanding shares, according to a filing with the Securities and Exchange Commission.

The John Paulson-run hedge fund has its roots in merger arbitrage and it also has been a vocal shareholder in recent telecom sector consolidation.

Paulson & Co. advocated changing terms to T-Mobile's (TMUS) acquisition of MetroPCS and the hedge fund made public statements that pushed forward other merger and acquisition activity in the industry, including SoftBank's takeover and recapitalization of Sprint (S) and AT&T's (T) acquisition of Leap Wireless.

Currently, Paulson & Co. is the largest vocal Time Warner Cable shareholder, according to TheStreet's review of SEC filings as of Sept. 30. 

Armel Leslie, a spokesperson for Paulson & Co. declined to comment.

Other hedge fund investors in the cable giant include Larry Robbins-run Glenview Capital Management and JAT Capital Management, however, both funds hold positions that represent less than 1% of Time Warner's outstanding shares, according to SEC filings compiled by Bloomberg.

The filings disclosing Time Warner Cable's shareholders, however, represent just a snapshot as of the end of the third quarter. Since then, speculation of a deal has increased. Funds disclose their holdings on a quarterly basis, bit a firm taking a greater than 5% stake would have to disclose their holding soon after taking their position.

John Malone, the billionaire chairman of Liberty Media (LMCA), a large minority shareholder in Charter Communications, has pressed for a merger between it and Time Warner Cable.

At the Goldman Sachs (GS) Communacopia conference, Malone told Bloomberg News he was still interested in a merger, even after reports surfaced that Time Warner Cable wasn't interested in a transaction. In an October investor presentation, Liberty Media even put up a chart of Time Warner's weak share price performance while playing The Rolling Stones song "Time Is on My Side."

Liberty Media owns 27% of Charter Communication's outstanding shares.

Craig Moffett, co-head of research firm MoffettNathanson said in a Monday telephone interview that if Time Warner Cable is unwilling to accept or consider takeover offers an activist could try to press for a deal.

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