Charter Communications Inc., backed by billionaire John Malone, is working with Goldman Sachs Group Inc. to pursue a bid for Time Warner Cable Inc., according to people with knowledge of the situation.
The move signals that Malone and Charter Chief Executive Officer Tom Rutledge are serious about revisiting a potential merger after being rebuffed by Time Warner Cable earlier this year, said one of the people, who asked not to be identified because the matter is private.
Time Warner Cable rejected an informal approach at the end of May because Charter -- a smaller company -- didn’t offer a premium, people familiar with the situation said last month. Malone, who owns 27 percent of Charter, is scouting potential acquisitions in an effort to turn the Stamford, Connecticut- based cable company into “a horizontal acquisition machine.”
“Malone has clearly thrown down the gauntlet,” said Paul Sweeney, an analyst at Bloomberg Industries. “He believes the cable industry needs further consolidation.”
Alex Dudley, a spokesman for Charter, declined to comment, as did Time Warner Cable’s Justin Venech and Goldman Sachs’s Michael DuVally.
Time Warner Cable rose as much as 5.5 percent to $120.15 in extended trading yesterday after Bloomberg News reported that Charter was working with Goldman Sachs. The shares had closed at $113.91 in New York. Charter rose 0.3 percent to $124.57 at the close.
Malone’s holding company, Liberty Media Corp., is considering a range of options for financing a merger, people familiar with the deliberations said last month.
“The whole name of the game in the cable business is scale,” Malone, 72, said in June at Liberty’s investor meeting.
Acquiring Time Warner Cable would be a challenge for Charter because of its smaller size and existing debt. Charter has a market value of $12.6 billion, compared with $33.1 billion for Time Warner Cable.
Malone -- who has a personal net worth of $6.8 billion, according to Bloomberg Billionaires Index -- has decades of experience negotiating cable deals in the U.S. and Europe. He built Tele-Communications Inc. in the 1970s and 1980s into one of the largest pay-TV companies before selling it to AT&T Corp. in 1999. That company later became part of Comcast after a $58.7 billion transaction in 2002.
After buying his stake in Charter in May, Malone set out to use the business to rebuild a U.S. cable empire. He said last month he was interested in both large and small cable acquisitions to give Charter more scale in negotiating programming contracts with content providers such as Walt Disney Co. and Comcast Corp.’s NBCUniversal.
“If he is looking for a transformative transaction, then Time Warner Cable would certainly fit the bill,” Sweeney said.