By Malathi Nayak and Jennifer Saba
NEW YORK (Reuters) - Even as their merger falls apart, Comcast Corp and Time Warner Cable Inc are both likely to emerge relatively unscathed, with acquisition target Time Warner Cable in particular facing a variety of options.
Comcast's decision not to pursue the $45 billion purchase of TWC, confirmed by a source on Thursday, undoes a complicated, multi-party deal and leaves TWC ready to choose whether to acquire, be acquired or try to go it alone.
Comcast's domestic business remains strong, and it does not have to pay a breakup fee if it formally decides to pull the plug. But it may look abroad, since many analysts consider opposition by regulators this week as a sign Comcast should not try for more big deals in the United States.
Analysts say both companies have improved operations while the deal was being reviewed over the last 14 months.
“The next step for Time Warner Cable is waiting,” said Laura Martin, an analyst with Needham & Co.
The wait is clearly for Charter Communications, which is controlled by John Malone’s Liberty Media Corp. Charter bid $37.3 billion or about $132.50 per share for TWC last year before being beaten by Comcast.
Malone, an expert deal maker known as the “cable cowboy,” was asked during a Liberty Media investor day in November whether he would pursue TWC if Comcast fell through. "Hell yes," he replied.
One issue: Martin expects Charter would offer less for TWC this time - around $130 per share - because it would have no competition. But TWC could choose other options.
"We could see (Time Warner Cable) doing a significant (stock)repurchase near term, or negotiating with Charter or Charter could come in with a hostile bid," Mike McCormack, an analyst at Jefferies & Co, said. "If they do a friendly deal, that would be preferable."
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Charter is also part of the complicated Comcast deal that has fallen apart, which would have had it acquire control of subscribers divested by the merged company and to buy Bright House Networks for $10.4 billion.
Time Warner Cable has the right of first refusal in the event of a Bright House sale, however, and it could see such a deal as a way to avoid being bought by Charter.
"We could see Time Warner Cable bid for Bright House before Charter comes in (to buy it)," Spencer Kurn, an analyst at New Street Research, said. But he expects the three to come together in one form or another, and that they would not face the regulatory scrutiny of Comcast-TWC. They have fewer subscribers and there is no content ownership, he said.