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Time Warner Cable Files for Initial Public Stock Offering

The move would give the company the means to acquire smaller rivals, analysts say.

October 19, 2006|Thomas S. Mulligan | Times Staff Writer

Time Warner Cable Inc., the nation's second-largest cable TV systems and the dominant player in Southern California, filed for an initial public stock offering Wednesday, potentially setting the stage for future acquisitions.

The offering, which had been expected, is aimed chiefly at giving creditors in Adelphia Communications Corp. an opportunity to sell some of the shares they received when parent Time Warner Inc. and Comcast Corp. bought Adelphia's cable systems in bankruptcy proceedings in July for $17.6 billion.

Adelphia creditors are required to sell in the IPO at least one-third of the 156 million Time Warner Cable shares they received, according to the Securities and Exchange Commission filing. The offering should easily raise more than $1 billion, based on Time Warner's previous valuations for that stake.

The stock offering also opens up to investors media giant Time Warner Inc.'s fastest-growing business, valued by some estimates at more than $40 billion. Time Warner executives hope that the offering will help bolster the parent company's languishing stock price, which edged up 21 cents Wednesday to $19.59 a share.

The offering also establishes a stock that can be used as currency to pay for potential cable acquisitions. Analysts expected that Stamford, Conn.-based Time Warner Cable might be eyeing such smaller rivals as Cablevision Systems Corp.

After the stock offering, New York-based Time Warner Inc. will continue to hold a stake of 84% in the cable subsidiary.

No date was set for the offering. Time Warner won't received any proceeds because the sellers are Adelphia creditors.

Some observers have speculated that Time Warner might use the offering as a first step toward cutting its stake in -- or spinning off altogether -- the cable business.

But Joe Bonner, media analyst at Argus Research, said, "They may want to reduce their holding over time, but I don't think they want to spin it all out."

The cable business has shown strong growth as consumers have flocked to its high-speed Internet and phone services as well as digital TV offerings.

For Time Warner, cable has helped make up for flagging advertising revenue in its publishing division, said analyst Blair Levin at Stifel, Nicolaus & Co.

In Los Angeles, Time Warner Cable recently picked up 1.2 million subscribers from Adelphia and 500,000 from Comcast.

In that three-way deal, Comcast relinquished its ownership stake in Time Warner Cable, and the two companies divided Adelphia's systems to complement their holdings.

Comcast, in turn, strengthened its position in the Washington area, Boston and Pittsburgh. With 14 million subscribers, Time Warner Cable is eclipsed only by Comcast in size.


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