Cable company Charter Communications and its 27-percent shareholder Liberty Media have been aggressively reviewing potential acquisition targets as they focus on how to consolidate the cable industry.
But while Charter has made an overture to Time Warner Cable and rumors are swirling in the industry, the company has not yet figured out what deal, if any, it would make.
A few weeks ago, Liberty's CEO Greg Maffei discussed the idea of the far smaller Charter entering a merger of equals with Time Warner Cable in a face-to-face meeting with that company's CEO, Glenn Britt. Maffei said no offer was made and the two men, who speak with some frequency, spoke generally about cable consolidation.
Sources close to Time Warner Cable said the company indicated it had no interest in any sort of a linkup with Charter, believing that it was simply an attempt by Charter to use Time Warner's balance sheet along with its own high multiple stock to pursue a deal that did not make financial sense.
Time Warner Cable was concerned enough about the broad overture to re-engage with longtime advisor Morgan Stanley and hire an outside PR firm in case it needed to defend against a more public onslaught.
That seems unlikely, although Liberty has sounded out financing sources for a Charter/Time Warner Cable deal, which would require at least $15 billion in new debt in addition to a huge amount of Charter equity. And that's only assuming a modest premium, one reason why Maffei said the odds of such a transaction are low.
Liberty closed its acquisition of 27 percent of Charter in May in a transaction that included four board seats. In an interview with CNBC in April, Liberty's Chairman John Malone made no secret of the fact that Charter could be a vehicle for further consolidating the industry, given its well-regarded management under CEO Tom Rutledge and a highly valued share price.
But it seems how that will take place, whether through a giant deal via Time Warner Cable, larger deals such as the privately held Cox or the family-controlled Cablevision or the smaller but significant Suddenlink, is far from decided.
Each of those potential deals would require a great deal of financial firepower and finesse. For now, while media types are getting hot for a deal, Charter and Liberty are still mulling their options of pursuing a deal that can actually happen in hopes of bringing John Malone back to pre-eminence in the business in which he got his start.
—By CNBC's David Faber.