Farallon Capital Management, LLC, is a global institutional asset management firm founded in 1986 by Thomas Steyer. It invests globally across asset classes, seeking superior risk-adjusted returns through bottom-up fundamental analysis that emphasizes capital preservation. While its investment philosophy remains consistent, its execution is flexible, allowing capital to shift among strategies, asset classes, and geographies based on prevailing opportunities. Farallon is headquartered in San Francisco and has offices in London, Singapore, Hong Kong, Tokyo, and São Paulo.
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Farallon started new positions in Microsoft Corp. (MSFT), Comcast Corp. (CMCSA), Time Warner Cable (TWC), and Spreadtrum Communications (SPRD) and it sold positions in AutoZone Inc. (AZO) and Pfizer Inc. (PFE).
Why buy Time Warner Cable (TWC)?
Time Warner Cable’s (TWC) stock has surged recently on speculations of a takeover approach from Charter Communications (CHTR), whose biggest shareholder is Liberty Media (LMCA). The takeover rumors started as early as June this year but were fueled after TWC posted disappointing results. Management declined to comment on the speculation during its earnings call, but outgoing chief executive Glenn Britt stated that the company is open to deals that would “make money for our owners.” News reports have claimed that Comcast (CMCSA) and Cox Communications, a privately held cable TV service provider, are exploring bids for TWC. Analysts are expecting a consolidation in the cable TV industry and have speculated that TWC’s lackluster results make it a suitable candidate for a merger.
TWC said revenue for 3Q 2013 increased 2.9% from the third quarter of 2012, to $5.5 billion. It said that although business services revenue grew, residential services revenue growth was only in high-speed data. Residential video revenue decreased, driven by declines in video subscribers and premium network revenue. This was reduced by approximately $15 million of subscriber credits issued in connection with a temporary blackout of Showtime that resulted from a dispute with CBS over broadcasting retransmission fees. This was partially offset by price increases and a greater percentage of subscribers purchasing higher-priced tiers of service. Residential voice revenue decreased due to a decline in average revenue per subscriber and fewer voice subscribers. The company said it aims to double business services revenue over the next four to five years, and that the newly acquired DukeNet and any other business services acquisitions will generate additional revenue. For 4Q 2013, TWC expects the financial impact from fewer 3Q subscribers, plus the customer credits issued in 3Q, will result in a full-year reported revenue growth rate of 3% to 3.5%. This is lower than previously anticipated.
Farallon manages approximately $19 billion for institutions, including college endowments, charitable foundations, pension plans, and high–net worth individuals. According to its website, Farallon pursues multiple investment strategies on an opportunistic basis, which includes five core investment strategies: credit investments, value investments, merger arbitrage, real estate–related investments, and direct investments. Each investment is evaluated independently on a fundamental basis.
Farallon invests globally, focusing on both developed and emerging markets. It invests in public and private debt and equity securities and direct investments in private companies and real estate. It prioritizes preserving capital. While it values and employs risk management analytics, it primarily manages risk through rigorous research and analysis. It also seeks to build strong relationships with the management of the companies it invests in.
Farallon Capital Management founder Thomas Steyer attended Philips Exeter Academy and graduated from Yale University. He received his MBA from Stanford Business School, where he was an Arjay Miller Scholar. He announced in October 2012 that he would be stepping down from his position at Farallon in order to focus on political activism—in particular, advocating for alternative energy.
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