Investors See Premium in Time Warner Cable Bundle

NEW YORK ( The Deal) -- After Time Warner Cable ( TWC) chairman and CEO Rob Marcus snubbed a $61 billion takeover from Charter Communications ( CHTR), investors on Tuesday appeared to agree that the cable operator is worth more than the $132.50 per share bid.

Share of Time Warner Cable edged above Charter's bid on Tuesday, gaining $3.67, or nearly 2.8%, to $136.07, suggesting that investors see the offer as a floor rather than a final price.

Charter Communications CEO Thomas Rutledge made his pitch in a call to analysts and investors after the close on Tuesday.

Gauging Time Warner Cable's value is difficult, due to anticipation that John Malone-backed Charter would bid for the New York cable operator.

While Charter may decide to increase its bid, it is also possible that Time Warner Cable has greater value if split up, akin to the 2006 deal in which Time Warner Cable and Comcast  (CMCSA) divvied up Adelphia Communications for $17.6 billion.

Charter's offer includes $82.54 in cash and $49.96 in stock. The deal would value Time Warner Cable's stock at more than $37 billion and would include $23.9 billion in net debt.

The bid provides no real premium to Time Warner Cable's recent trading. The stock closed at $32.40 on Monday, before the announcement. The target's management called the bid "grossly undervalued" in its response. Time Warner Cable's board previously told Charter that it is open to a deal at $160 per share, with $100 of the compensation in cash and $60 in stock.

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