US media giant Time Warner may have to use some of the cash earmarked for acquisitions to buy shares in its own cable unit.
In a surprise move, America's leading cable operator Comcast last week asked that its 17.9% stake in Time Warner Cable be registered for public sale.
Time Warner must now undertake "commercially reasonable efforts" to gain a green light for the sale from the Securities and Exchange Commission within 120 days. The SEC, however, is currently investigating the firm's accounts, meaning approval for a stock registration is unlikely. That means Time Warner may have to purchase some or all of the shares to settle the matter.
The news is a blow to the media mammoth's acquisition plans. Time Warner had been expected to increase its cable-TV portfolio after an asset sell-off allowed it to meet debt reduction targets a year early.
Comcast acquired the stake after it purchased AT&T's cable unit in 2002. It took over the latter's interest in the Time Warner Entertainment partnership and received the TWC holding when this alliance was unravelled last year [WAMN: 02-Apr-03].
Time Warner initially planned to pay off Comcast by floating up to 20% of TWC -- America's number two cable operator -- in the first half of 2003. However, the accounts probe has delayed this offering.
Some regard Comcast's surprise request as a negotiating tactic in its bid to cash in its stake.
Data sourced from: The Wall Street Journal Online; additional content by WARC staff