Big Investor to TWC, Charter: Talk It Out

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Charter Communications gained some traction in its efforts to pressure Time Warner Cable to the negotiating table last week, after a major shareholder in both MSOs sent a letter urging the parties to talk out their differences.

Charter launched its $132.50-per-share offer for TWC on Jan. 13. The larger operator deemed the price “grossly inadequate,” off ering a $160-per-share valuation as an alternative. Since then, Charter has initiated a campaign to sway TWC shareholders to pressure the company to accept a deal.

Sources confirmed several published reports last Friday that Baltimore-based investment fund T. Rowe Price sent a letter to TWC’s board of directors, urging the company to negotiate a deal with Charter. T. Rowe Price is TWC’s eighth-largest shareholder, with a 2.3% interest in the company, and is Charter’s fifth-largest stakeholder, with 5.2% of its outstanding stock.

The T. Rowe Price letter did not specify a price, and at press time it was unclear as to what the TWC board’s reaction would be, according to the reports.

T. Rowe Price has been an activist investor in the past. It opposed the Dolan family’s attempts to take Cablevision Systems private in 2007 and, more recently, it objected to Dell founder Michael Dell’s initial moves to buy out the computer maker last year.

Any influence the T. Rowe Price letter would ultimately have remained to be seen, but it at least indicated that Charter’s efforts are beginning to bear some fruit. Last week, Charter turned up the heat on TWC, warning its shareholders on Jan. 21 that the longer the company waits for a deal, the less valuable it becomes.

“The goal should be to complete a merger agreement now, which creates value for the shareholders of both companies relative to the status quo,” Charter said in a statement. The company added that, with a loss of 813,000 basic-video customers in 2013, “TWC’s value to Charter is declining, driven by continued customer-relationship and triple-play subscriber losses, and financing costs from further delays.”

Last Thursday, Liberty Media chairman John Malone threw his support to the deal, adding that the combination would help spur innovation and cooperation throughout the industry.

“This industry brought to the home 500 channels, digital compression and high-speed Internet, but needs scale to attract the developers and innovators critical to remaining competitive,” Malone said in a statement.

So far the attempts have had little impact on the stocks. Charter shares were down 1% ($1.14 each) to $132.33 per share, while Time Warner Cable shares were essentially flat at $134.49 (down 6 cents) in early trading Jan. 24.

TAKEAWAY

Charter’s campaign to sway Time Warner Cable shareholders to pressure the No. 2 MSO into accepting a deal seemed to be working last week as T. Rowe Price urged TWC’s board to negotiate.

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