Charter Communications is preparing to make an offer of less than $135 a share for Time Warner Cable, according to people briefed on the matter.
The offer, which is likely to come in the form of a so-called bear hug letter, will consist of a mix of cash and Charter stock, setting in motion a new round of consolidation in the cable operator industry.
Such a deal would have an equity value of around $38 billion. Charter could make its offer as early as this week.
Charter has been vocal about its appetite for a deal with Time Warner Cable, the second-largest cable operator after Comcast. In recent months, as speculation about a deal has increased, Time Warner Cable’s stock has surged from around $94 per share to as high as $138.22 per share. On Friday, shares closed at $131.41 apiece, up more than 8 percent since early September. Charter believes it can get away with offering a small premium above the current trading price because of the steep run-up in recent months.
Though Charter would have to take on significant debt to pay for Time Warner Cable, people familiar with the company’s thinking believe it is a manageable amount, and the combined company could pay it down quickly. Time Warner Cable does not currently have much leverage and could support a larger debt load, they said.
Time Warner Cable, however, appears in no rush to do a deal. Though its pay television subscribers are falling, it continues to find success providing high-speed Internet and businessservices.