SEC Filings Map Out Inner Workings Of Comcast/TWC Deal

TWC Reached Out To Cable Giant in June, SEC Documents Say
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Comcast and Time Warner Cable initially broached the subject of a possible merger almost a year ago, before deciding to pull the trigger on a deal in February, according to documents filed with the Securities and Exchange Commission Thursday.

According to an S-4 registration statement filed by Comcast on March 20 outlining an upcoming special shareholders’ meeting to approve its $69 billion deal to acquire Time Warner Cable, TWC executives first approached Comcast about a possible deal back in June 2013, shortly after Charter Communications began talks about its own possible deal with the New York-based cable operator.

According to the document, Charter CEO Tom Rutledge and Liberty Media CEO Greg Maffei met with TWC management about a possible deal with TWC on May 28 and later June 21. At the time, TWC’s board was concerned that “the value of Charter’s stock was uncertain, the risks associated with a highly leveraged combined enterprise that would result from Charter’s acquisition of TWC, and the fact that TWC likely would be contributing most of the potential synergies and financial capacity to fund the consideration that would be payable in such a transaction,” the document stated.

Based on the board’s assumptions and findings, TWC’s then-chairman and CEO Glenn Britt informed both Charter and Liberty that it was not interested in continuing discussions.

But according to the documents, Britt and Comcast chairman and CEO Brian Roberts had discussed the possibility of a merger from time to time, and in mid-June suggested that their representatives meet to discuss the possibility in more detail. On June 27, legal reps from both companies met to discuss a deal.

At the same time, the SEC documents say, Comcast was also in talks with Charter about possibly assisting the smaller company in its pursuit of Charter.

In early July, Charter made its first of three subsequent bids for TWC, a $114 per share offer consisting of $79.11 in cash and 0.25 shares of Charter stock, It was rejected as inadequate. Charter and TWC had no further discussions about a possible merger until late October, according to the filing.

On Oct. 15, Roberts brought up the merger subject with TWC chief operating officer Rob Marcus – who had been chosen as Britt’s successor when the chairrman and CEO retired at the end of the year.  That led to a meeting between Marcus and Comcast vice chairman and CEO Michael Angelakis on Oct. 17 and later conversations between TWC’s and Comcast’s management teams. On Oct. 23, Roberts and Angelakis indicated that although Comcast might be interested in pursuing a merger, it was not prepared to do so in the short term.

That appeared to mean that Comcast was focusing on participating in a Charter acquisition of TWC, which according to reports involved Comcast agreeing to purchase about 3 million customers from the combined company once their deal was closed.

One day later on Oct. 24 Charter made its second unsolicited proposal for TWC valued at $127 per share -- $82.54 in cash and 0.329 shares of Charter – which was again rejected as too low.

Charter and TWC had no further discussions until November. In the meantime, on Nov. 25, Comcast and TWC representatives met to discuss possible legal issues around a merger.

According to the filings, Charter was still interested in a deal and in December restarted talks with TWC. At the same time, it became apparent that Comcast preferred to partner with Charter on a TWC deal rather than pursue an acquisition on its own.

Charter and TWC will still far apart on price, however. According to the document, TWC met with its financial advisers and came up with what it considered to be a fair valuation opf the company -- $160 per share, including $100 per share in cash and a 20% collar on the both companies’ stock prices. In a Dec. 27 phone conversation with Marcus, Rutledge “indicated that he was disappointed to hear that TWC and Charter were so far apart on price and that he saw no value in continuing conversations about a potential transaction at that time.”

Less than two weeks later, on Jan. 7, Rutledge ran into Marcus at Consumer Electronics Show and informed the TWC chief that given their inability to agree on price, Charter would make its offer to acquire TWC public.

That promoted Marcus to place another call to Roberts, who was also attending CES, according to the documents, and talked about possible alternatives, but did not reach any conclusion.

Charter made its last offer public on Jan. 13 -- $132.50 per share, including $82.54 in cash and 0.372 shares of Charter stock. TWC again rejected it as too low.

While Comcast appeared to be on board with Charter as late as Jan. 27 according to the documents – Roberts contacted Marcus and said he believed Comcast’s participation would enable Charter to offer a higher price to TWC shareholders—that scenario began to quickly unravel. By Feb. 4 – after Charter and Comcast broke off talks because they could not agree on terms – Roberts again contacted Marcus, expressing interest in re-engaging talks about a Comcast/TWC merger.http://www.multichannel.com/cable-operators/its-official-comcast-merge-time-warner-cable/148282

Perhaps sensing that the deal was in jeopardy, Liberty Media chairman John Malone decided to step in. According to the documents, Malone called TWC board member N.J. Nicholas on Feb. 5 expressing “interest in pursuing an alternative, more collaborative path toward combining TWC and Charter.” Nicholas said TWC was firm in its commitment to maximize shareholder value and would hold fast to its valuation of the company.

At the same time, TWC’s talks with Comcast were progressing rapidly. By Feb. 6, Marcus met with Angelakis to hammer out terms of a potential deal, with Marcus indicating that TWC would accept an all-stock transaction that was closer to its $160 valuation of the company. One week later, on Feb. 13, Comcast and TWC announced they had reached a deal, with Comcast agreeing to pay $158.82 per share for TWC in an all-stock transaction.  

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