What 24/7 Wall St. wanted to do was evaluate this based upon past coverage and future pricing. The latest report of merit was that Comcast Corp. (NASDAQ: CMCSA) would make a joint offer with Charter Communications, Inc. (NASDAQ: CHTR) to acquire Time Warner Cable. The question was, is and likely will remain in place: At what price?
Charter is worth over $13 billion and is still transitioning to profitability after its restructuring. Comcast is the biggie of the media sector now with a market value of some $128 billion in market value trading at almost 20-times expected 2013 earnings and about 17-times expected 2014 earnings. Time Warner Cable has a market value of $37 billion and trades at 20-times expected 2013 earnings and 17.5-times expected 2014 earnings.
Where the problem arises in valuing Time Warner Cable at $155 per share as the middle of the range. A $155 price values the raw entity at 20.5-times expected 2014 earnings, and that is before the costs of breaking the thing up, changing systems, working with upgrades, local changeover expenses and more.
Cable companies will still evaluate each other on an EBITDA basis most likely over a raw earnings number. This industry is so established that we wonder if that is fair, but it is what it is so long as a buyer agrees. Our take is that $130 is already factoring in a premium and $150 or $160 would be a stretch. Still, an asset is worth whatever a buyer is willing to pay for it.
Where this gets interesting is when you consider that Time Warner Cable has just named a former Insight Communications executive named Dinni Jain as the company’s chief operating officer after that role is vacated by incoming CEO Rob Marcus.
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