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What’s Wrong With This Picture
Even though Comcast’s proposed $45.2 bilion acquisition of Time Warner Cable was scrapped by regulators a month ago, that deal at least made some sense: a bigger company was buying a smaller company. Over the weekend, the bigger M&A news, is that now another company will give the Time Warner Cable acquisition a try: John Malone’s Charter Communications, which has agreed to buy TWC for $50 billion.
There is just one concern: before today’s announcement, Charter had a market cap of $20 billion, less than half of Time Warner Cable’s $48 billion. Or shown another way: a company with 6.3 million total subs is buying a company with 15.4 million subscribers. In other words, courtesy of ZIRP and massive leverage, telecom behemoths are now in danger of being consumed by relative dwarfs.
We’ll pass comment on the fact that the share price of both companies jumped in response to the news. After all, even Citi figured out what is going on there.
As for the “synergies”, expect the BLS to come up with its own set of “double seasonal adjustments” to compensate for the thousands of job “synergies” that are about to be unleashed.
Source: http://silveristhenew.com/2015/05/26/whats-wrong-with-this-picture-11/
