Rumors. Denials. Desires. What's it all mean? You don't have to wait and tune in tomorrow to find out. Read on.
Troubled cable operator Charter Communications (Nasdaq: CHTR) may soon go private, if the musings of its controlling shareholder, Microsoft (Nasdaq: MSFT) co-founder Paul Allen, come to pass.
The company has approved a series of provisions in recent days to make it more difficult for someone to try and acquire the company, as speculation of a takeover has grown. Executives at Time Warner Cable (NYSE: TWC), for example, have publicly expressed an interest in acquiring its assets . However, Allen has said he would consider taking the company private, selling it off, or even merging it. Allen, who owns 52% of the company but controls 91% of the voting power, filed an amended statement with the SEC expressing his wishes.
Of course, this isn't the first time Allen has mulled the possibility of taking the company private. In 2002 he filed a similar report with the SEC.
Yet even if Time Warner or Comcast (Nasdaq: CMCSA) were serious about wanting to acquire Charter, it would be an expensive proposition. With nearly $20 billion of debt that it can't service, $81 million in cash, trailing revenue of $5.7 billion, and losses of more than $1.2 billion over the past 12 months, it would be a heavy load for a company to pick up. Its enterprise value-to-operating income is much higher than Comcast or Time Warner, but when you exclude depreciation and amortization, they are somewhat equally valued.
Yet there's been a little bit of a spark in the company lately. Revenues from Charter's 5.7 million subscribers have been increasing, rising 8.4% in the latest quarter, and its losses narrowed somewhat to $360 million, from $382 million a year ago.
Although Allen's controlling position means he gets whatever he wants, until recently, CEO Neil Smit was specifically squashing such buyout rumors. At the time, Smit said that if anyone would be bought out, Charter would do the buying. Considering its financial predicament, that would seem to be a bit of posturing on management's part, and in light of Allen's history of head-faking going-private talk, it would seem to be much ado about nothing.
With Charter Communications' stock falling today, the day after Allen's filing, it would seem that the market isn't putting much credence into the scenario, either.
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Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.
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