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Probability of Time Warner and Charter Deal Gains According to Macquarie Analyst

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Macquarie analyst Amy Yong commented on the "stepped up" probability of a Time Warner Cable Inc. (NYSE: TWC) merger with Charter Communications (NASDAQ: CHTR) following Liberty Media Corporation's (NASDAQ: LMCA) deal to buy Sirius XM Holdings Inc. (NASDAQ: SIRI).

Yong raised Time Warner's price target from $135.00 to $150.00 and reiterated an Outperform rating.

The analyst reported that the pressure to turn around operations “is mounting” and a bidding war is possible. Macquarie added that Comcast Corporation (NASDAQ: CMCSA) may be interested in Time Warner Cable's New York and Los Angeles footprint.

Yong commented that Time Warner could support its multiple by leveraging balance sheet to increase outstanding $4 billion buyback authorization. She estimates that Time Warner would have access to incremental approximate $10 billion in buybacks if the company ups leverage by 1x.

Macquarie sees an upside to free cash flow estimates. The analyst cited that there is an approximate $300 million tailwind from lower pension funding due to the new IRS rule around capital item deductions. Yong added that 2014 subscriber trends will likely show signs of stabilization.

On Wednesday, Time Warner Cable and Charter Communications closed at $132.55 and $136.09, respectively.

Latest Ratings for TWC

DateFirmActionFromTo
Dec 2014BTIG ResearchDowngradesBuyNeutral
Oct 2014Brean CapitalDowngradesBuyHold
Oct 2014Bank of AmericaMaintainsNeutral

View More Analyst Ratings for TWC
View the Latest Analyst Ratings

Posted-In: Amy Young MacquarieAnalyst Color News Rumors Analyst Ratings

 

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