Bright House, controlled by the Newhouse family, is worth more than $10 billion, the source said. It has about 2.5 million cable subscribers with its biggest market in Florida, where it has a strong presence in Tampa and Orlando.
Charter shares soared $12.89 or 7 percent to $195.39 per share on the news, which was first reported by Bloomberg.
A spokesman for Charter declined to comment, while Bright House acknowledged the speculation in a statement on Thursday.
“While we have had conversations with many parties about this transaction, we do not have an agreement with anyone regarding future plans for Bright House,” a company spokeswoman said in the statement.
Bright House has an operating agreement in place with Time Warner Cable Inc that allows it to share technology and programming rates with the larger cable operator.
That agreement came into question when Comcast Corp made an offer to buy Time Warner Cable last year. The company has brought on a financial adviser to help it explore its options, according to sources familiar with the matter.
Charter, along with its largest shareholder, Liberty Media Corporation, has been public about its desire to consolidate the industry. It made a bid for Time Warner Cable last year before Comcast swooped in. That deal is still awaiting approval by regulators.
The talks between Charter and Bright House could still fall apart and may not result in a deal, the source added.