What would it take to buy Time Warner Cable?

Just a few weeks ago Time Warner Cable was considered a laggard of the pay-TV industry.

Now, the nation’s second-largest cable provider is one of the hottest properties around. Not only is Charter Communications (with help from equity owner Liberty Media Corp.) interested in acquiring Time Warner Cable, but Comcast Corp. may want to make a run at all or some of the company, which boasts about 11 million subscribers around the country.

Cox Communications is considering kicking the tires of Time Warner Cable as well.

Like Time Warner Cable, Cox operates cable systems in Southern California. Getting Time Warner Cable’s properties in Los Angeles and elsewhere would be a coup for the Atlanta company. News of Cox’s potential interest was first reported by the Wall Street Journal.

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Wall Street is eager for a deal and has driven up Time Warner Cable stock. It closed Tuesday at $136.56, an all-time high.

Although Time Warner Cable hasn’t commented on any specific suitor, executives have said they would entertain offers from potential buyers -- as long as any deal would provide shareholder value.

So how much would it take to acquire Time Warner Cable?

The company has a market capitalization that exceeds $38 billion. Any deal would probably be a combination of cash and stock. A prospective buyer would need at least $25 billion in cash or financing, according to Adam Ilkowitz, media analyst at Nomura Equity Research.

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Ilkowitz’s model assumes a $150 share price for Time Warner Cable. He figured that 60% of the deal price would come from cash or financing. The other 40% -- roughly $16.5 billion -- would probably be in the form of stock.

Charter, the nation’s fourth-largest cable provider, would probably use a cash infusion of about $6.5 billion from cable pioneer John Malone’s Liberty Media, according to Ilkowitz. Liberty owns 27% of Charter Communications.

Such a cash infusion would allow Liberty to keep at least 25% of Charter if Charter were able to pull off its deal for Time Warner Cable, Ilkowitz said.

Comcast -- with a market capitalization of about $130 billion -- could more easily pull off a purchase, although the company already carries about $42 billion in debt and such a move would be closely scrutinized by media watchdogs and federal regulators.

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The ambitions of Comcast have not been as transparent as Malone’s or Charter’s. Comcast executives have told Wall Street analysts the Philadelphia cable giant doesn’t need to grow.

“We are really focused on executing our business plan and we really think there’s a lot of organic growth opportunities,” Comcast Chief Financial Officer Michael Angelakis said on a recent earnings call. “That being said, we ... always want to look at everything.”

And, of course, Comcast’s chief executive, Brian Roberts, is one of the industry’s leading opportunists who helped build Comcast into a juggernaut through a series of acquisitions, including buying AT&T’s cable systems (which had acquired them from Malone a few years before).

Taking over Time Warner Cable’s systems in New York might be Comcast’s play.

“It would complete the Northeastern corridor for them,” Ilkowitz said, adding that Comcast already provides service in Washington, D.C., Philadelphia, New Jersey and Connecticut. Still, the analyst cautioned, “New York is one of the most difficult markets because it overlaps with Verizon FiOS, which you could argue is a superior product.”

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And what’s to stop a technology company, for example, Google Inc., from jumping into the mix?

Google rolled out a super-fast broadband service, Google Fiber, in greater Kansas City, Mo., last year. It also plans to expand its Internet service in Austin, Texas, and Provo, Utah.

“I don’t think Google would gain that much by buying a cable company,” Ilkowitz said. “They are already accomplishing their purpose, which was to demonstrate the value of high-speed broadband service.”

A Google representative said the company would not comment on “rumor and speculation.”

Staff writer Joe Flint contributed to this story.

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