January 15, 2014
Charter Communications went public on Monday with its latest bid for Time Warner Cable. The $37.4 billion cash-and-stock proposal, submitted via letter from Charter CEO Tom Rutledge to TWC Chief Rob Marcus, follows three private offers submitted since June that have all been turned down by the nation’s second-largest cable company. TWC rejected the bid as “grossly inadequate.” Rutledge said Charter, the fourth largest cable operator, has no plans to increase the offer.
The total deal is valued around $60 billion — the aforementioned $37.4 billion, plus Charter would assume roughly $24 billion in debt. Making the letter public could allow Time Warner Cable shareholders to put pressure on management and the board.
“Our intent is to talk to Time Warner Cable shareholders and convince them that putting together the companies, fixing [Time Warner Cable’s] customer service issues and getting the company back on a growth trajectory will create enormous value for shareholders,” Rutledge said in an interview.
TWC rejected the offer in a statement, citing the price. In addition, Marcus said, “the actual value delivered to [Time Warner Cable] shareholders could be substantially lower given the valuation, operational, and significant balance sheet risks embedded in Charter’s stock.”
“Marcus added that Time Warner Cable previously told Charter in December that it would be open to a deal at a price of $160 a share, including $100 a share in cash,” reports The Wall Street Journal. “He said in an interview Charter’s current offer for Time Warner Cable would be ‘essentially letting them steal’ the company.”
This week’s offer is valued at $132.50 a share, including $83 a share in cash and $49.50 in Charter stock.
“Investors and analysts seem to believe that Time Warner Cable will get sold, although the deal structure probably will not be what Charter has proposed,” reports the Los Angeles Times. “The two major questions are whether any other cable companies — such as Comcast, Cox or Cablevision — will materialize to bid for Time Warner Cable. And, if not, whether $132.50 a share is the appropriate valuation for the company.”
Comcast, the largest U.S. cable operator by subscribers, has reportedly also considered making an offer. While “Comcast has a stronger balance sheet than Charter,” notes WSJ, “it would also likely face tougher regulatory hurdles.”