Time Warner Cable Shares Surge on Report of Liberty Media Deal

NEW YORK ( TheStreet) - John Malone's Liberty Media ( LMCA) continues to press a merger with Time Warner Cable ( TWC) using its 27% holding in cable system Charter Communications ( CHTR), Bloomberg News reports.

After being rebuffed earlier in June, Malone is continuing to work on structuring a deal that would be the largest in size since a media industry merger wave over a decade ago, according to the Bloomberg report.

Time Warner shares gained over 8% to $112.01 in Thursday afternoon trading, while Charter shares gained over 5% to $125.72. Liberty Media shares gained over 2.5% to $127.51.

Still, according to the Bloomberg report, Time Warner is not interested in a merger, given the cable giant's larger size.

According to industry analysts, a deal for Time Warner would only likely occur at a significant premium to the company's $30 billion market-plus cap, potentially out of reach of smaller competitors like Liberty Media and Charter Communications.

"Our conclusion is that Charter would have much more to gain from a merger than Time Warner Cable and, therefore, a merger of equals is unlikely to occur," Bryan Kraft, an Evercore Partners analyst wrote in a June 25 analysis of a possible deal.

Kraft noted Charter would be "highly motivated" to pursue a stock merger with Time Warner Cable given the current premium valuation the company carries in stock markets. The analyst questioned whether Time Warner Cable would see similar benefits of a stock merger and highlighted a cash deal could increase the combined company's leverage to uncomfortable levels.

Charter could also look to acquire Cablevision ( CVC), the Bloomberg report said, citing unnamed sources. The Bloomberg report added new details to Liberty Media and Malone's merger targets after CNBC reported earlier in June both companies had discussed a deal without making headway.

Liberty Media's reported interest in Time Warner Cable in recent weeks, creates a cable and media industry intrigue that mirrors a merger wave on Wall Street near the peak of the dot-com bubble a decade ago.

At the Nasdaq market top in the tech bubble, media industry conglomerates such as Time Warner ( TWX), Comcast ( CMCSA), Viacom ( VIAB) and Disney ( DIS) underwent a merger wave seeking to build out cable and internet assets to complement their media businesses.

From 2000 to 2009, the largest media conglomerates wrote down $200 billion in assets as a result of a bad acquisitions and misguided 'strategic' investments, according to The Curse of the Mogul, a sweeping study on why an overstretch of C-Suite ambition has destroyed shareholder value throughout the industry.

Liberty Media, however, has been a savvy acquirer and recent deals such as an over $10 billion acquisition of Virgin Media ( VMED), a crisis-time capital infusion into SiriusXM Radio ( SIRI) and spinoffs of assets such as Starz ( STRZA) indicates John Malone is taking a somewhat more measured approach in trying to expand his cable and media empire.

A merger of large cable providers, meanwhile, would contrast with mega-mergers done a decade ago, as they would likely wrench out significant synergy in the slow growth industry.

At Liberty Media's annual shareholder meeting in June, Malone signaled to the industry the company would continue its aggression in mergers," Malone called Liberty Media "a horizontal acquisition machine."

The company was rumored to be interested in supplementing its Virgin Media acquisition for European cable TV properties with an acquisition of German cable system Kabel Deutschland. However, earlier in June, the company announced a merger with U.K-based telecom Vodafone ( VOD).

-- Written by Antoine Gara in New York.

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