Time Warner Cable slips in gray market; Charter gains; Cablevision edges up; W Holding plunges

By Ronda Fears

Memphis, Jan. 5 - Time Warner Cable shares began trading Friday on a when-issued basis and weakened throughout the session, while Charter Communications Inc., speculated as an area of potential acquisition of systems by Time Warner Cable, got a big boost on the chatter. Another rumored target, Cablevision Systems Corp., however, had trouble holding onto gains and settled slightly lower.

Another media name, Viacom Inc., was sharply higher after hiring a new head of its internal merger and acquisition strategy group.

Elsewhere, technology stocks were in focus Friday on fears that profit forecasts are too high in the sector after Motorola Inc. missed estimates.

As Motorola will not be reporting full results until before the market opens Jan. 19, traders noted heavy play in the January options contracts, with the $20 calls volume skyrocketing to 10,588 contracts with a decline of $1.60 on the day to $3.40, countered by a surge to 14,040 contracts in $25 puts with a gain of $1.90 on the day to $6.20. Motorola shares (NYSE: MOT) fell $1.61, or 7.83%, to $18.94.

Time Warner Cable coming

When-issued trading of shares for Time Warner Cable began Friday. Time Warner Cable will be the second-largest cable company in the United States as the product of Time Warner Inc. and Comcast Corp. buying the assets of defunct cable company Adelphia Communications Inc. out of bankruptcy.

The stock opened at $43 and traded as low as $40.50 before climbing back to $41 in the last half-hour of trade, according to the trader. He said that while the stock had come under pressure throughout the session, it was not surprising.

Adelphia bondholders looking to flip their Time Warner Cable shares quickly to cash out was putting most of the pressure on the stock, one trader said.

"Everyone is just trying to get a handle on this right now and what might happen when it hits the market," one trader said.

"I'm not surprised by what happened today because the [Adelphia] bondholders were bailing; they were the big sellers. I won't be surprised when it comes back, either."

The shares that will publicly trade are currently owned by Adelphia bondholders, many of which began arbitrage trading in those bonds against the when-issued shares Friday. But Adelphia stockholders also are expected to own 16% of Time Warner Cable.

Time Warner and Comcast bought the Adelphia cable assets for $17 billion in July, but Adelphia's exit plan was only approved earlier this week, after a five-year stint in bankruptcy.

Now, the market anticipates that unless Time Warner Cable pursues a regular initial public offering, which is not expected although documents to that effect were filed in October, the new stock will begin trading on the New York Stock Exchange by the end of January, if not sooner. The ticker will be "TWC."

The effective date of Adelphia's plan is Jan. 12.

Presently, traders said the stock is only being quoted verbally but may get a when-issued symbol to trade over the counter.

Charter seen as TWC target

As Time Warner Cable emerges as a separate company, traders said there was heavy speculation in the market Friday that it would be looking to add to its portfolio, and St. Louis-based Charter Communications was a leading name in discussions along those lines. Cablevision was another, lesser discussed target.

Charter shares (Nasdaq: CHTR) gained 16 cents on the session, or 5.18%, to close at $3.25, near the session high of $3.26.

"The scuttlebutt is that Time Warner Cable may be looking to make acquisitions like some of the systems owned by Cablevision or Charter Communications, since it will have separately traded stock to use to make some sort of deal," one trader said.

He said there was one line of thinking, too, that Time Warner Cable will have to bump up its capital expenditures in order to upgrade or roll out new services for the customers acquired from Adelphia.

Greenwood Village, Colo.-based Adelphia serves customers in 31 states with analog and digital video services, high-speed internet access and other advanced services over broadband networks.

Cablevision focus on Liberty

Cablevision did not manage to hold much of its gains Friday, despite chatter elsewhere that Liberty Media is in informal talks with it to buy its Rainbow Media unit - a source of wrangling within Cablevision for several years.

After trading in a band of $28.80 to $29.11, Cablevision shares (NYSE: CVC) closed with a 5-cent gain, or 0.17%, at $28.99.

Bethpage, N.Y.-based Cablevision, which also owns Madison Square Garden and Radio City Music Hall, is run by the Dolan family, which has offered $27 per share to take Rainbow Media private. A special committee of the board is reviewing that proposal, but many onlookers expect the Dolans will have to boost their bid.

Viacom higher, on the hunt

More acquisition activity from Viacom pushed that stock higher, too, but traders said it was a tentative gain given that the media company has already been so busy in the M&A.

Viacom series A shares (NYSE: VIA) rose 24 cents on the day, or 0.58%, to $41.52 while the series B shares (NYSE: VIA-B) rose a similar 23 cents, or 0.56%, to $41.47.

On Friday, the company announced that Wade Davis has been appointed senior vice president of strategy, mergers and acquisitions. He will be responsible for strategic planning, business development, identifying and assessing potential mergers and acquisitions, managing Viacom's interactions with the banking and investment communities on strategic transactions, and leading the execution of resulting transactions.

Prior to joining Viacom, Davis was an investment banker in the technology and media sectors for more than a decade. He was formerly a managing director, co-head of investment banking and head of mergers and acquisitions at ThinkEquity Partners, and before then was at Lazard Venture Advisors, LP, Lazard Freres & Co. and Wasserstein Perella & Co.

"Viacom has made a number of very important acquisitions over the last year, and Wade has been instrumental in identifying and bringing those businesses in-house. His newly expanded responsibilities are not only recognition of these important contributions, but also a testament to his leadership abilities and his significant untapped potential as a strategic advisor," said Viacom chief executive Philippe Dauman, in a news release.

"Tom [Viacom chief financial officer Thomas E. Dooley] and I will continue to rely on Wade's M&A experience, as well as his strong strategic view of emerging markets, as we assess how to best take advantage of the many growth areas available to Viacom in the burgeoning digital arena."

W Holding off sharply

Puerto Rico-based bank W Holding Co. Inc. was off sharply Friday on rumors that a loan to New York-based specialty pharmaceutical company Inyx Inc. had gone bad.

W Holding stock (NYSE: WHI) fell 39 cents on the day, or 6.4%, to $5.70, coming off the day's low of $5.52.

"It's a bank in Puerto Rico; it was down 8% at one point," one trader said.

"A $120 million loan to Inyx, a pharma, is going sour I am told."

On Nov. 20, Inyx reported that a management-led group of investors had approached the company's board of directors about taking the company private and said it had informed W Holding that it intended to pay off the $120 million loan amounts by year-end 2006. The company said its CEO and chairman Jack Kachkar had pledged a personal guarantee against a portion of that amount.

But nothing has come to pass, yet.

In November, the company said it had formed a special committee comprised of three independent directors to evaluate any proposal and planned to retain an independent investment-banking firm.

The group included Kachkar and Inyx president Steve Handley along with an unidentified group of outside investors.

Meanwhile, Inyx has a definitive agreement to acquire Pharmapac UK Ltd., one of the leading contract pharmaceutical production and packaging providers in the United Kingdom, a transaction that is expected to close this week, and a pending acquisition of a German pharmaceutical production business.

Inyx is a specialty pharmaceutical company operating in the United States, Canada and Europe. It develops and manufactures prescription and over-the-counter pharmaceutical products such as aerosols for dermatological and topical drug applications, metered dose inhalers and dry powdered inhalers used for respiratory ailments, metered dose nasal and throat pumps, and sterile salines and injectables.

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