TWC rejects “grossly inadequate” $61.3BN Charter takeover bid

Editor | 14-01-2014


Charter Communications has had a rather sharp rejection of a $61.3 billion offer to buy No 2 US MSO Time Warner Cable (TWC).

The proposal would create a cable company serving 20 million customers in 38 states, giving Charter significant leverage in terms of negotiating programming costs with content companies — a primary driver for future consolidation, analysts say. The deal would be highly leveraged: No 4 MSO Charter has just 4.3 million subscribers with a market cap that is just a third the size of TWC's.
Charter has being trying to seal a deal with TWC for more than six months and had hit a wall until December 2013 when the companies’ respective CEOs and CFOs met to walk through Charter's plan including the structure, financing, tax and cash flow aspects of a transaction.
However, Charter says that despite these talks, the flow of information has been “exclusively one-way”. As a result of what it regards as “no genuine intent” fromTWC management and board of directors to engage in a merger agreement, it was prudent to bring the matter to TWC shareholders directly.In an open letter to TWC CEORob Marcus, Charter chief executive Thom Rutledge criticised TWC for ignoring his company’s overture and instead making “a verbal offer at an unrealistic price expectation”.
In response, TWC condemned the Charter bid as a “third grossly inadequate proposal” and “non-starter” that substantially undervalued TWC.
Marcus added: “Our high quality assets, unique scale, synergy potential, growth opportunities and strong financial position should command a premium valuation compared to precedent transactions, not the discount offered by Charter. Not only is the nominal valuation far too low ... the actual value delivered to TWC shareholders could be substantially lower given the valuation, operational, and significant balance sheet risks embedded in Charter’s stock … Our shareholders deserve to realise that value and benefit from the unique position of the company.”