Activist investors have increased both in number and in their individual battles against publicly traded companies. At times, it's a nuisance that distracts management and directors from making the best choices for furthering the company, but other times it's needed. For Time Warner Cable (NYSE:TWC), the situation may be the latter. Besides arguing with broadcasters over carriage fees (highlighted by a monthlong blackout of CBS), the company has rebuffed interest from other media heavyweights interested in consolidation -- though many analysts believe such moves will allow content distributors to thrive in today's disrupted market. One noted investor has been stocking up on shares, which raises the question -- is Time Warner headed for an activist showdown?
John Malone is one of the biggest voices in the media landscape, and for good reason. The outspoken Liberty Media chairman is a founding member of the modern cable industry, and for some time now the investor and board-inhabitant has expressed the need for cable companies to consolidate in order to remain competitive in today's landscape. This philosophy has manifested itself in his pushing for Time Warner Cable to merge with Charter Communications (NASDAQ:CHTR). Malone is the largest investor in Charter (via Liberty, which took a 27% stake in the company), and believes the two companies would create a bigger entity more capable of negotiations with the broadcasters and content providers.
Because the cable companies are, relatively speaking, smaller than their satellite-TV counterparts, they cannot hold as much leverage in negotiations on fees.
Thus far, the merger talks have amounted to little, as Time Warner management apparently does not share the same urgency to consolidate. Meanwhile, the company's stock has held steady -- gaining 15% in the past 12 months, though some believe the bulk of that increase is a result of merger speculation. Operating performance has not given investors too much to celebrate.
Readying for war?
One investor with a pedigree for boardroom battles has been collecting shares of Time Warner Cable. Keith Meister of Corvex Management is a disciple of Carl Icahn, a man who needs no introduction here. Corvex doesn't yet hold much Time Warner stock -- less than 1%, The Wall Street Journal reports. Meister and the relatively new Corvex have already dabbled in the ways of the investor's former boss, and if things don't improve at Time Warner Cable, an interest drama may develop.
Time Warner Cable may need the proverbial fire to be lit, as the company has boosted earnings not by strategic M&A activity or expanding lines of business, but instead because of price hikes. With the might of satellite-TV providers and the quickly growing Internet streaming world, increasing the price customers have to pay doesn't sound like the greatest strategy.
This may be one company whose shareholders benefit from a megaphoned investor.
Fool contributor Michael Lewis has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.