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Tuesday, August 22 Business

Charter rumors persist year after merger

STAMFORD — Last year, Charter Communications supercharged its growth with two blockbuster deals. Now, other giants are apparently eyeing Charter for their own expansions.

French telecommunications firm and Cablevision owner Altice along with SoftBank, the owner of American telecom powerhouse Sprint, are weighing offers to acquire Charter, according to a number of media reports this week. Their reported interest does not surprise industry experts, who think Charter’s potential asking price would likely preclude an imminent deal.

“I think their motivation to acquire Charter is very simply market share,” said John Gerlach, an associate professor and business executive in residence in Sacred Heart University’s College of Business. “And you have to think about the cost of the acquisition. If they’re going go to do this deal, these companies would be thinking of using a lot of cash which they don’t have, so they would have to borrow and pay interest on it.”

Charter officials declined to comment on the latest reports of prospective deals.

Buying Charter would represent a coup for any bidder. With its approximately $65 billion acquisition of Time Warner Cable and Bright House Networks in 2016, Charter became the second-largest cable provider in the country after Philadelphia-based Comcast. Charter’s video, voice and internet programs serve some 27 million residential and business customers.

Some estimates have pegged a potential purchase of Charter at around $200 billion. The prospective asking price could climb higher amid the surge in Charter’s stock value. Compared with its worth six months ago, its share price has jumped about 20 percent to nearly $400 on Friday.

“The normal situation when a public company is acquired is that there is a fairly large premium to the stock price,” said David Souder, an associate professor and academic director of the executive MBA program in the University of Connecticut’s School of Business. “Those premiums can be of any size, but 20 percent is not unusual.”

Gerlach puts the odds of another Charter deal being agreed to before the end of 2017 at less than 10 percent. He said he thinks Softbank and Altice have complicated their potential bids by tipping their hands about their interest.

“The price has already been driven up,” Gerlach said. “It’s going to be difficult for them to earn a decent return on that investment, because the investment would be 30 percent higher than it was three months ago.”

Speculation has swirled for many months about potential mergers, acquisitions and collaborations involving Charter and Verizon, Sprint and Comcast.

Among confirmed partnerships, Charter and Comcast announced in May the launch of a joint initiative to support their participation in a national wireless marketplace. The terms of their venture stipulate neither company could make “material” transactions in the wireless sector during the next year without the other’s consent.

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“Another deal for Charter doesn’t seem imminent,” Souder said. “This seems like the beginning stages of a negotiation that may or may not lead somewhere.”

Amid the potential deals, Charter officials told Hearst Connecticut Media in late June they were exploring a move of the company’s headquarters within Stamford to support its growing business. Charter now occupies eight floors in the approximately 500,000-square-foot building at 400 Atlantic St.

Only a handful of properties in Stamford, such as the empty office complexes at 677 Washington Blvd. and 1 Elmcroft Road, would likely be large enough to accommodate Charter’s operations.

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