Cox Communications Inc., the third-largest U.S. cable provider, has held talks about combining with rival Charter Communications Inc., according to two people with knowledge of the matter.
Cox President Pat Esser has discussed a deal with representatives from Liberty Media Corp., which owns a 27 percent stake in Charter, said one of the people. The structure of a potential deal hasn’t been determined, including which company might be the acquirer, the other person said.
Liberty and Charter are also still pursuing an acquisition of Time Warner Cable Inc., the people said. Billionaire John Malone, who controls Englewood, Colo.-based Liberty, has said he wants Charter to get bigger so it can gain leverage in negotiations with TV networks, which have sought higher prices for the use of their programming.
Todd Smith, a spokesman for Atlanta-based Cox, declined to comment. Cox provides cable TV, Internet and phone service in the Omaha area and employs about 1,100 in its operations here.
Malone sees mergers as an appealing way for the cable industry to cope with the lower video profit margins that have come from higher programming costs and fewer new customers, he said in Liberty Media’s annual meeting in June.
“The whole name of the game in the cable business is scale,” he said then. Charter has the opportunity to be a “horizontal acquisition machine, looking at other assets in the U.S. cable business that lack scale to have synergy,” he said.
Dissolving the trust is a step toward Cox gaining flexibility to merge the cable company, one of the people said.
Cox would serve as another option for Charter if Time Warner Cable, which has been resistant to a combination, refuses to agree to a deal, the person said.