Charter Communications CHTR
announced today that it has sent a letter to Time Warner Cable TWC proposing that
the companies immediately engage in discussions to conclude a merger agreement
to combine the companies.
Charter believes that, unlike substantially all other cable transactions over
the last five years that were cash transactions, this transaction would be
based on combining shareholder groups and allowing Time Warner Cable
shareholders to participate at a substantial premium to Time Warner Cable's
unaffected stock price as well as meaningful upside following completion.
Charter has made repeated overtures to Time Warner Cable on this topic for
more than six months. Until December, Time Warner Cable chose not to engage
or find out more. The CEOs and CFOs respectively met in December to walk
through Charter's plan including the structure, financing, tax and cash flow
aspects of a transaction, but the flow of information has been exclusively
one-way. Because Time Warner Cable's stock has run up on widespread
shareholder endorsement of a deal to the point where the premium is already
reflected in the share price, Time Warner Cable's response led Charter to
determine there is no genuine intent from Time Warner Cable's management and
Board of Directors to engage in a merger agreement, and that it is prudent to
bring the matter to shareholders directly. The full text of the letter is
included below.
Goldman Sachs and LionTree Advisors are serving as lead financial advisors to
Charter in connection with this transaction. Guggenheim Securities is also a
financial advisor to Charter. BofA Merrill Lynch, Credit Suisse, and Deutsche
Bank Securities Inc. are also financial advisors to Charter, and together with
Goldman Sachs, are leading the financing for the transaction. The law firms
Wachtell, Lipton, Rosen & Katz and Kirkland & Ellis LLP are also representing
Charter.
Conference Call
Charter will host a conference call on Tuesday, January 14, 2014 at 4:30 p.m.
Eastern Time (ET) related to the contents of this release.
The conference call will be webcast live via the company's website at
charter.com. The webcast can be accessed by selecting "Investor & News
Center" from the lower menu on the home page. Participants should go to the
webcast link no later than 10 minutes prior to the start time to register.
Those participating via telephone should dial 866-919-0894 no later than 10
minutes prior to the call. International participants should dial +1
706-679-9379. The conference ID code for the call is 31454794.
Letter Sent To Time Warner Cable Management
January 13, 2014
Time Warner Cable Inc.
60 Columbus Circle
New York, New York 10023
Attention: Robert D. Marcus
Chairman and Chief Executive Officer
Dear Rob:
I enjoyed spending time with you in December discussing our prior proposals
and the challenges our industry faces. As you know, I believe we have a
significant opportunity to put our companies together in a way that will
create maximum, long-term value for shareholders and employees of both
companies. Our financing plan, which gives us the ability to deleverage
during a period where our operating plan has sufficient time to be
implemented, is prudent. Our history of operating performance is well
understood, as are our tax assets.
As you know, Time Warner Cable quickly rejected our proposals in June and
October, and refused to engage until we met in December. I communicated a
willingness to submit a revised proposal in the low $130s, including a cash
component of approximately $83. Following our meeting, you agreed to have our
CFOs meet to review the structure, financing, tax and cash flow aspects of a
transaction, which we understand was very helpful for Time Warner Cable. We
believed Time Warner Cable and its Board of Directors would recognize the
significant value of this combination and genuinely engage. Instead, you came
back 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), widespread shareholder endorsement of a deal, and Time Warner Cable
shareholders' approximately 45% ownership in the upside of the proposed
transaction. Furthermore, your proposal to significantly increase the cash
component of the price contradicts Time Warner Cable's own public statements
on debt leverage. The information provided to date has been exclusively
one-way, which further reinforces the point that there is no genuine interest
from Time Warner Cable management and Board of Directors to engage on this
opportunity.
While we are preserving all options going forward, we remain open to real
engagement. We would like to engage with you to conclude an agreement for a
business combination that is beneficial for your shareholders and ours. We
would be prepared to offer a cash/stock election mechanism that would allow
those shareholders who wish to participate in the benefits of a combination to
do so, while others who wish to cash out will be able to do so at a meaningful
premium. The financing to complete this transaction is fully negotiated, and
we can be in a position to sign commitment letters in a matter of days.
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.
We are fully prepared to finalize a deal on an extremely expedited basis. We
believe that time is of the essence to prepare our companies to meet the
challenges of the industry, which is why we have decided to announce the
status of our discussions to date to both sets of shareholders.
With best regards,
/s/ Tom
Thomas M. Rutledge, President and Chief Executive Officer
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