Time Warner Cable shares are getting an additional boost following reports that France's Altice ATCEY, hot off its acquisition of Suddenlink, the seventh-largest U.S. cable-TV operator, approached the New York-based Internet-service operator, about a merger. Time Warner Cable has gained nearly 10% since Comcast's (CMCSA) failed bid for a $45.2 billion merger opened the possibility for other bidders.
Normally, when two companies decide to merge, the acquirer's shares fall while the target's stock rise. But in the case of Time Warner Cable and Charter, both stocks continue to rise even though Charter would technically be considered the acquirer. That's because a merged company may become a more formidable competitor to the largest U.S. broadband operators, AT&T (T), Verizon (VZ) and Comcast (CMCSA), while gaining all the advantages of a larger company.
Charter, which was gaining 0.4% on Thursday to $177.71, was raised to a buy from hold by Matthew Harrigan, a media analyst at Wunderlich Securities, who increased his 12-month price target on the company to $221. Charter, he said, could rise as high as $250 per share if a "still likely considerable [merger and acquisition] kicker" goes into effect.
And kickers in the form of deal-making among U.S. cable-TV operators are likely to accelerate.