Shares of cable operator Charter Communications (CHTR) are up $7.86, or almost 9%, at $97.95, following a report from The Wall Street Journal’s Dennis Berman and Martin Peers that Liberty Media‘s (LMCA) chairman John Malone is considering buying 25% of the company for $2.5 billion, citing unnamed sources.
Liberty shares are down $1.33, or 1.2%, at $109.04, while shares of Cablevision Systems (CVC), which is a perennial subject of M&A speculation, are up 24 cents, or 1.7%, at $14.32. Shares of the U.S.’s largest cable operator, Comcast (CMCSA), are down 38 cents, or 0.9%, at $40.33.
Lazard Capital’s Barton Crockett, who has a Buy rating on Liberty shares, writes this afternoon that such a deal seems to him “credible,” but that a deal won’t necessarily happen.
Liberty might be induced to make a Charter investment in order simply to put some of its cash to work, and given that Malone knows cable “very well,” he observes:
Liberty Media, by our calculation, could afford this investment, if it sold some of its non-core public equity stakes. We see net cash at Liberty, post Starz spin and other stock transactions, including acquiring control of Sirius, at $1.7B. We see another $1.1B of investments in non-core publicly traded securities that could be sold, including $200M plus stakes in Time Warner, Time Warner Cable, and Viacom. Liberty holds another $800M of strategic stakes in publicly traded securities that are unlikely to be sold, including Barnes & Noble convertible preferred, and Live Nation equity (where Liberty Media CEO Greg Maffei last week was named chairman).
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