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Is Charter A Better Buy Than Time Warner Cable In Final Months Before Merger?

Is Charter A Better Buy Than Time Warner Cable In Final Months Before Merger?
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JPMorgan's Philip Cusick upgraded the rating for Charter Communications, Inc. (NASDAQ: CHTR) from Neutral to Overweight, with a price target of $210. He maintained an Overweight rating for Time Warner Cable Inc (NYSE: TWC), with a price target of $194.

Charter Communications has agreed to buy Time Warner Cable for $100 in cash and 0.5409 shares per share. Analyst Philip Cusick mentioned that Charter Communications' deal with Time Warner Cable and Bright House Network [BHN] is expected to close in May.

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"The deal spread has tightened to the point where we would rather buy the pro forma company through CHTR than TWC," Cusick wrote, while adding that the deal spread has increased from 8 percent to 3 percent since January 1.

The analyst believes that an expected increase of over 5 percent in Charter Communications' shares is unlikely to be matched by the combination of an increase in the price of Time Warner Cable's shares and the deal spread closing.

"Additionally, since we believe that many if not most investors in the two companies will want to retain their exposure to the Cable space through Charter, re-deploying the $100 in cash to CHTR after the deal could be difficult," the JPMorgan report noted.

Cusick expects the combined company to generate free cash flows of $17 per share by 2018, assuming zero revenue synergies and $1.2 billion of run-rate cost savings.

Latest Ratings for CHTR

Dec 2016RBC CapitalInitiates Coverage OnOutperform
Nov 2016Moffett NathansonUpgradesNeutralBuy
Sep 2016CitigroupMaintainsBuy

View More Analyst Ratings for CHTR
View the Latest Analyst Ratings

Posted-In: JPMorgan Philip CusickAnalyst Color Long Ideas Upgrades Reiteration Analyst Ratings Trading Ideas Best of Benzinga


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