Time Warner Cable Rejects Charter’s $61 Billion Takeover Offer

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STAMFORD/NEW YORK: The board of directors at Time Warner Cable has unanimously rejected Charter Communications' $61 billion takeover offer, calling the proposal "grossly inadequate."

This is Charter's third attempt to merge with TWC. It first offered cash and stock valued at around $114 in June and $127 in October. Its latest bid was around $132.50 a share, including a cash component of around $83.

Thomas M. Rutledge, the president and CEO of Charter, sent a letter to Robert Marcus, the chairman and CEO of TWC, outlining the new proposal. He wrote: "This transaction is beneficial to Time Warner Cable shareholders who remain invested in the combined company because they realize the value creation from cost reductions, faster organic growth, and leveraged and tax advantaged returns. We also believe that the new combined company, through potential future swaps and divestitures with other industry participants, can help rationalize the geographic holdings of the industry into more efficient entities capable of providing better services and products into a very competitive marketplace, thus generating higher returns for the combined company and the industry at large."

Time Warner Cable quickly rejected the offer. Marcus commented: “Charter’s latest proposal is a non-starter. First and foremost, it substantially undervalues TWC and would represent an EBITDA multiple of approximately 7X, well below past transactions in the cable sector. Indeed, 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, but because a significant portion of the purchase price would be in Charter stock, 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.

“TWC is a one-of-a-kind company. We are the only large pure-play, non-family controlled cable operator in the United States, with 15 million customers in some of the country’s best markets. We have an incredibly robust network, having invested almost $15 billion in CapEx since our separation from Time Warner Inc. in 2009. We are continually enhancing the capacity of that network to support future growth and expansion of our product offerings, adding significantly faster data speeds and advanced multi-platform video offerings. In short, we’re in a great business and confident we have the right assets, the right people and the right strategic plan to deliver great experiences to our customers and create significant value for our shareholders. Our shareholders deserve to realize that value and benefit from the unique position of the company.”

Marcus continued, “Our job above all is to act in the best interests of our shareholders. We are not seeking to sell the company, but consistent with what we have always said about maximizing shareholder value, on December 27 we made it clear to Charter that our board is open to a transaction with Charter at a price of $160 per TWC share, consisting of $100 in cash and $60 per share of Charter common stock, subject to a symmetrical 20 percent collar to protect our shareholders on the value of Charter shares, which currently trade at a historically high multiple. The $160 price represents a forward multiple of only approximately 8X. 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."

N.J. Nicholas, Jr., the independent lead director of the TWC board, added, “The board takes very seriously its obligation to maximize shareholder value and, on that basis, we gave Charter our bottom line. The Charter proposal doesn't come close to providing our shareholders with the kind of value and protections they should expect in a transaction. In fact, it would transfer significant value from our shareholders to Charter shareholders, while dramatically increasing the risk profile for our shareholders. As such, it is wholly inconsistent with the interests of our investors and our responsibilities as a board.”