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Analyst Confident Charter-Time Warner Deal Will Get Approval In Washington

Jayson Derrick

Charter Communications, Inc. (NASDAQ: CHTR) and Time Warner Cable Inc. (NYSE: TWC) announced on May 26 that they have entered into a definitive agreement in which Charter will merge with Time Warner.

Under the original terms, Charter will provide $100 in cash to Time Warner shareholders in addition to shares of the new public parent company equivalent to 0.5409 shares of Charter for each Time Warner share outstanding.

Charter further added that the deal values each Time Warner share at approximately $195.71 based on Charter's closing price on May 20.

Related Link: Time Warner Cable Q2 Earnings Miss Views

Shares of Time Warner were trading at $190.84 just before Friday's opening bell.

Wunderlich's New Price Target Way Above Take-Out Price

In a report published Friday, Wunderlich analyst Matthew Harrigan reiterated a Buy rating on Time Warner Cable with a newly introduced $219 price target, noting that he is "confident" the company will successfully merge with Charter.

Harrigan's price target is noticeably above Charter's valuation. The analyst explained that his estimate is based on a "2016 merger closure assessment using a fair value discounted cash flow approach linked to the S&P 500."

Harrigan continued that this confidence in a deal approval is based on Charter's CEO Tom Rutledge's orientation toward: 1) selling more services, rather than pushing price; 2) the company's 60Mbps broadband entry ramp; 3) sundry new business initiatives; and 4) demonstrable new job creation in-house will "resonate" strongly with the regulatory bodies.

Finally, on the off chance that the deal does not go through, the analyst has a floor value valuation of $187 for Time Warner's stock.

Latest Ratings for CHTR

Date Firm Action From To
Jul 2015 Deutsche Bank Neutral
May 2015 JP Morgan Maintains Neutral
May 2015 Wunderlich Upgrades Hold Buy

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