wabuffo Posted May 26, 2015 Share Posted May 26, 2015 9.1x EBITDA for TWC. Not quite as high as Altice's Suddenlink deal at 9.8x. Comcast's deal with TWC was 8.3x It probably is expensive, but much of the price is being paid in an even more expensive currency (CHTR stock) with no collar (other than a toggle for higher cash % for TWC shareholders). I find it interesting that Malone isn't putting much of his own capital into the deal (he's actually getting diluted), but is engineering everything so that he retains 25% voting control of the combined entity's equity (through Liberty Broadband's multi-class share structure + control of Newhouse's proxy). This give Malone control of the capital allocation and strategic direction while giving him option value (buybacks, rights offerings) to maximize his personal stake down the road. wabuffo Link to comment Share on other sites More sharing options...
muscleman Posted May 26, 2015 Share Posted May 26, 2015 I am interested in playing this merger arb. Do you think it is wise to buy TWC at $178 per share right now? If the deal goes through, I will get $195. If the deal doesn't go through, the price of TWC may drop a lot. Thoughts? Link to comment Share on other sites More sharing options...
gurpaul88 Posted May 26, 2015 Share Posted May 26, 2015 There is always the possibility of another bid as well. Link to comment Share on other sites More sharing options...
muscleman Posted May 26, 2015 Share Posted May 26, 2015 There is always the possibility of another bid as well. But in terms of Margin of Safety, how should I view this? Can I say that the current price isn't too high and there is room for cost cutting, so even if the deal fails, TWC might be able to fix itself? Link to comment Share on other sites More sharing options...
Liberty Posted May 27, 2015 Author Share Posted May 27, 2015 Faber interviewing Tom Rutledge: http://video.cnbc.com/gallery/?video=3000382977 Link to comment Share on other sites More sharing options...
folivera13 Posted May 29, 2015 Share Posted May 29, 2015 Economist on Malone: http://www.economist.com/news/business/21652316-what-giant-deal-says-about-americas-media-and-internet-industries-malone-wolf Link to comment Share on other sites More sharing options...
Liberty Posted May 30, 2015 Author Share Posted May 30, 2015 The Atlantic has a profile of Malone: http://www.theatlantic.com/business/archive/2015/05/john-malone-time-warner-cable-charter-communications-and-tech/394505/ Link to comment Share on other sites More sharing options...
folivera13 Posted June 1, 2015 Share Posted June 1, 2015 NYT profile of Tom Rutledge: http://mobile.nytimes.com/2015/06/01/business/media/capturing-a-prize-in-cable.html?referrer&_r=0 Link to comment Share on other sites More sharing options...
Liberty Posted June 3, 2015 Author Share Posted June 3, 2015 Putting this here, but applies to other Malone businesses: Link to comment Share on other sites More sharing options...
loganc Posted June 3, 2015 Share Posted June 3, 2015 Thanks for posting. Where did you find that figure? Link to comment Share on other sites More sharing options...
Liberty Posted June 3, 2015 Author Share Posted June 3, 2015 Thanks for posting. Where did you find that figure? Not sure what the original source is, I found it via twitter: https://twitter.com/2ndadopter/status/606160341785939968 Link to comment Share on other sites More sharing options...
merkhet Posted June 3, 2015 Share Posted June 3, 2015 Apparently, it came from a Credit Suisse note on Discovery Communications. Link to comment Share on other sites More sharing options...
gfp Posted June 3, 2015 Share Posted June 3, 2015 For anyone that missed it - the combined Liberty entities' annual meeting webcast is worth listening to if you can fast forward through the multiple formal votes. John Malone and Maffei (before he has to leave for some reason) make great candid comments on all the industries they are involved in. http://ir.libertymedia.com/events.cfm Link to comment Share on other sites More sharing options...
Liberty Posted June 9, 2015 Author Share Posted June 9, 2015 New writeup on the VIC: http://www.valueinvestorsclub.com/idea/LIBERTY_BROADBAND_CORP/136618 Interesting excerpt: When Comcast structured divestitures to Charter and Greatland Communications, they were focused on appeasing regulators in terms of keeping video subs below the 30% market share threshold without giving due consideration to broadband market concentration. Of course, when Tom Wheeler suggested a change in the definition of high speed broadband to 25Mbps or above, it dramatically changed the perceived market power of a Comcast combination due to the drop out of DSL as a high speed competitor. What’s interesting to note in the table above is that Comcast’s market share only changes by 1% due to a transaction with TWC (from 55.8% to 56.8%). The reason that this is the case is that Time Warner Cable has virtually no broadband customers at speeds above 25Mbps. A combined Charter / TWC would have dramatically less market share of the high speed broadband market (likely less than 20%). Link to comment Share on other sites More sharing options...
rogermunibond Posted June 9, 2015 Share Posted June 9, 2015 Doesn't that imply that TWC is underinvested in their cable infrastructure? I'm guessing it's not because they have >25Mbps broadband but do a crappy job selling or marketing it. For CHTR, buying TWC means you're going to be buying an asset that needs lots of capex. Link to comment Share on other sites More sharing options...
Liberty Posted June 10, 2015 Author Share Posted June 10, 2015 Doesn't that imply that TWC is underinvested in their cable infrastructure? I'm guessing it's not because they have >25Mbps broadband but do a crappy job selling or marketing it. For CHTR, buying TWC means you're going to be buying an asset that needs lots of capex. Once they finish going all digital, that'll free a lot of space in the pipes to take speeds up. Analog video takes a surprising amount of space (which makes sense when you think that you can't compress it the way you can compress digital HD with something like h.264). It's a big opportunity to be on the cusp of higher speeds, and meanwhile it'll help with the government review to have a lower share of that arbitrary 25mbits number. Also: https://oraclefromomaha.wordpress.com/2015/06/10/charter-communications-time-warner-cable-betting-big-on-the-us-cable-industry/ Link to comment Share on other sites More sharing options...
rogermunibond Posted June 10, 2015 Share Posted June 10, 2015 TWC's switch to all-digital went into effect on May 5. Don't they still lag behind CMCSA in terms of Docsis 3.0 implementation? Link to comment Share on other sites More sharing options...
muscleman Posted June 10, 2015 Share Posted June 10, 2015 Doesn't that imply that TWC is underinvested in their cable infrastructure? I'm guessing it's not because they have >25Mbps broadband but do a crappy job selling or marketing it. For CHTR, buying TWC means you're going to be buying an asset that needs lots of capex. Once they finish going all digital, that'll free a lot of space in the pipes to take speeds up. Analog video takes a surprising amount of space (which makes sense when you think that you can't compress it the way you can compress digital HD with something like h.264). It's a big opportunity to be on the cusp of higher speeds, and meanwhile it'll help with the government review to have a lower share of that arbitrary 25mbits number. Also: https://oraclefromomaha.wordpress.com/2015/06/10/charter-communications-time-warner-cable-betting-big-on-the-us-cable-industry/ Just read through that article. Does anyone know why he thinks Charter is at a FCF inflection point? I read CHTR's 10-Q that says they expected capex to remain elevated. However I do see that 2015 Q1's capex is 350m compared with 500m in 2014 Q1. Link to comment Share on other sites More sharing options...
jay21 Posted June 10, 2015 Share Posted June 10, 2015 Doesn't that imply that TWC is underinvested in their cable infrastructure? I'm guessing it's not because they have >25Mbps broadband but do a crappy job selling or marketing it. For CHTR, buying TWC means you're going to be buying an asset that needs lots of capex. Once they finish going all digital, that'll free a lot of space in the pipes to take speeds up. Analog video takes a surprising amount of space (which makes sense when you think that you can't compress it the way you can compress digital HD with something like h.264). It's a big opportunity to be on the cusp of higher speeds, and meanwhile it'll help with the government review to have a lower share of that arbitrary 25mbits number. Also: https://oraclefromomaha.wordpress.com/2015/06/10/charter-communications-time-warner-cable-betting-big-on-the-us-cable-industry/ Just read through that article. Does anyone know why he thinks Charter is at a FCF inflection point? I read CHTR's 10-Q that says they expected capex to remain elevated. However I do see that 2015 Q1's capex is 350m compared with 500m in 2014 Q1. Declining capex + expanding ebitda = large growth from basically minimal FCF Link to comment Share on other sites More sharing options...
Munger_Disciple Posted June 11, 2015 Share Posted June 11, 2015 Does anyone know if the Charter-TWC deal is tax free to TWC shareholders? Thanks in advance. Link to comment Share on other sites More sharing options...
muscleman Posted June 11, 2015 Share Posted June 11, 2015 Does anyone know if the Charter-TWC deal is tax free to TWC shareholders? Thanks in advance. Same question here since TWC shareholders will receive $100 cash. There is no all stock option. Link to comment Share on other sites More sharing options...
gfp Posted June 11, 2015 Share Posted June 11, 2015 I don't think it is tax free for TWC holders (except for Liberty Broadband's TWC stock, which is tax free all stock transaction). The merger docs say that the cash payment will be treated as a redemption but they won't withhold tax from the payment. If your cost basis is below the value of the cash and new stock you receive, I think you owe tax on the gain. Same as the KRFT merger. Link to comment Share on other sites More sharing options...
Munger_Disciple Posted June 11, 2015 Share Posted June 11, 2015 Thanks for the explanation. Link to comment Share on other sites More sharing options...
Liberty Posted June 25, 2015 Author Share Posted June 25, 2015 http://www.multichannel.com/news/policy/charter-files-application-twc-merger/391690 Charter has filed its application with the Federal Communications Commission to buy Time Warner Cable. The application includes a public interest statement with promises to go beyond the FCC's new Open Internet rules by agreeing to a legally enforceable condition that the combined company, which it dubs "New Charter," will not impose data caps or usage-based billing, neither of which it currently engages in, Charter noted. Link to comment Share on other sites More sharing options...
merkhet Posted June 25, 2015 Share Posted June 25, 2015 http://www.multichannel.com/news/policy/charter-files-application-twc-merger/391690 Charter has filed its application with the Federal Communications Commission to buy Time Warner Cable. The application includes a public interest statement with promises to go beyond the FCC's new Open Internet rules by agreeing to a legally enforceable condition that the combined company, which it dubs "New Charter," will not impose data caps or usage-based billing, neither of which it currently engages in, Charter noted. That's surprising. I thought this was one of the things Malone said was inevitable. Link to comment Share on other sites More sharing options...
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