The players
Charter Communications, Inc. (NASDAQ:CHTR) is not as big a name as, say, Comcast Corporation (NASDAQ:CMCSA), but it is the fourth-largest cable provider in the United States, at least by market cap. The company was recently beleaguered and underwater financially (entering bankruptcy in 2009), but has since become a market darling, largely fueled by buyout speculation. John Malone’s Liberty Media Corp (NASDAQ:LMCA) currently holds a 27% position in the company, with the ability to gain as much as 40%.
As a traditional cable operator in a heavily disrupted cable and telecom environment, Time Warner Cable Inc (NYSE:TWC) has shown a successful adaptability since being spun off from its parent company. But with major telecoms and tech companies quickly building out high-speed networks that can package TV, Internet, and phone all in one, Time Warner Cable Inc (NYSE:TWC) is on the hunt for an affordable way to catch up.
Finally, Liberty Media Corp (NASDAQ:LMCA) is a company ripe for merger, according to Malone. The company’s strong balance sheet and attractive assets make it a small but valuable firm with a top-notch management team — especially in the cable space. Prior to Liberty Media, John Malone owned Tele-Communications, which was sold to AT&T Inc. (NYSE:T) and was at one time the largest cable operator in the United States.
Last week, CNBC reported that TWC and Liberty Media Corp (NASDAQ:LMCA) had engaged in merger talks, with Charter as a center point of the discussion.
If it happens; if it doesn’t happen
While last week’s news had Time Warner up almost 10 points in trading, some analyst doubt on Tuesday brought the heat down a few degrees. The truth is, the merger would make sense for both parties, but would be most beneficial to Time Warner Cable Inc (NYSE:TWC).
The overall winner, however, is Liberty Media Corp (NASDAQ:LMCA). The company is in great shape, with a majority stake in Sirius XM Radio Inc (NASDAQ:SIRI) that it can easily make gains from. In addition, the company has a big stake in the world’s largest concert promoter, Live Nation Entertainment, Inc. (NYSE:LYV), and owns the Atlanta Braves.
Liberty shareholders will get a quick reward in the case of a merger with Time Warner Cable Inc (NYSE:TWC), but I believe capital appreciation and/or a buyout (and thus capital appreciation) will occur regardless of this deal. While Malone has polarized some with a difficult, shark-like business presence, he is without doubt one of the most talented capital allocators in the media industry. Liberty’s CEO Greg Maffei is a smart manager as well, having successfully spun off premium cable TV company Starz (NASDAQ:STRZA) and significantly rewarded shareholders along the way.
Whether the merger goes through or not, Liberty should be the focus of this trio.
The article Time Warner Cable to Wed Liberty Media? originally appeared on Fool.com.
Fool contributor Michael Lewis has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
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