Charter Urges Time Warner Cable to Engage in Merger Talks

Time Warner Cable (NYSE:TWC) swiftly rejected an overture from Charter Communications (NASDAQ:CHTR) to engage in merger talks, calling the general offer “grossly inadequate.” Charter chief executive Thomas Rutledge sent a letter on Monday to Robert Marcus, his counterpart at Time Warner Cable, to push for further talks over a “business combination that is beneficial for your shareholders and ours.” In the letter, Rutledge said Charter told Time Warner Cable in December that it would be willing to submit a proposal in the low-$130s on a per-share basis, with a cash component of about $83 a share. According to several news reports, Charter is ready to offer $37.4 billion, or $132.50 a share, to acquire its larger rival. That bid, which includes $49.50 a share in stock and $83 a share in cash, would be worth around $61 billion including debt. Rutledge said all financing for Charter’s bid has been secured, and the Stamford, Conn.-based company would be able to sign commitment letters in a matter of days. The company is “preserving all options going forward” and “open to real engagement,” he added. In response, Marcus said that while the company is not seeking out a sale, Time Warner Cable is open to a transaction worth $160 a share consisting of $100 a share in cash and $60 a share in Charter stock. “We gave Charter our bottom line, but rather than pursuing this path, Charter has chosen to go public with its third low-ball offer trying to pressure TWC’s Board into selling the company at a grossly inadequate price,” Marcus said in a statement. Charter, backed by media mogul John Malone’s Liberty Media (NASDAQ:LMCA), has long been rumored to be readying an offer for Time Warner Cable or another target in the cable industry, which analysts have said is poised for consolidation. At a shareholder meeting last June, the media mogul said he wants the Connecticut-based company to become “a horizontal acquisition machine.” Charter, the fourth-largest U.S. cable provider, was initially rebuffed in its attempt to acquire New York-based Time Warner Cable. Rutledge said Charter offered up proposals in June and October, and then Time Warner Cable refused to talk terms in December. Rutledge also criticized Time Warner Cable for countering with “a verbal offer at an unrealistic price expectation which ignores a full 39% premium already reflected in Time Warner Cable’s stock (as of last Friday),” he wrote in his letter. Other cable companies have also been the subject of rumors involving Time Warner Cable. Privately held Cox Communications was reportedly considering a bid, as was industry leader Comcast (NASDAQ:CMCSA). Charter may be timing its bid to put the greatest amount of pressure on Time Warner Cable, since investors can begin nominating directors for election to its board on Jan. 16. Shares of Time Warner Cable were trading 96 cents higher at $133.36 in after-hours trading. Charter jumped 1.7% to $136.54.