Charter Challenges Comcast-Time Warner Cable Deal in Proxy

Mar 28, 2014 4:36 pm ET

(Updates shares in fourth and fifth paragraphs.)

March 28 (Bloomberg) -- Charter Communications Inc. urged Time Warner Cable Inc. investors not to endorse a takeover by Comcast Corp., signaling it’s not backing down in its pursuit of Time Warner Cable without a fight.

Comcast, which outbid Charter this year with a $45 billion stock offer, is too susceptible to regulatory hurdles because it’s the biggest in the cable industry, Charter said today in a filing. Time Warner Cable, meanwhile, refused to engage with Charter to develop a merger deal, Charter said.

Charter, the fourth-largest U.S. cable company, had offered to buy Time Warner Cable -- the No. 2 -- for $37 billion in cash and stock, a bid rejected as too low by Time Warner Cable Chief Executive Officer Rob Marcus. Although Comcast’s shares have declined about 10 percent since the acquisition agreement was announced, they would need to drop at least another 8 percent to fall to the levels of Charter’s proposal.

Comcast’s merger offer was worth $158.82 a share when it was announced Feb. 13 before the market opened. That figure has fallen to $142.49 as Comcast’s stock has declined.

Charter, which advanced 0.9 percent to $122.41 today, has also dropped since the Comcast deal was announced, by 11 percent. Comcast gained 0.9 percent to $49.56 at the close, while Time Warner Cable, based in New York, rose 1.4 percent to $135.87.

“We are fully committed to our merger with Comcast, which we believe is in the best interests of shareholders,” Time Warner Cable said today. John Demming, a Comcast spokesman, said the company declined to comment.

Buying Subscribers

Like Philadelphia-based Comcast, Charter pursued a takeover of the second-largest U.S. cable carrier to reduce costs and gain greater leverage in negotiations with networks and programming providers like CBS Corp. and Viacom Inc.

Charter, based in Stamford, Connecticut, is considering buying some of the 3 million subscribers Comcast plans to sell following the acquisition, according to a person familiar with the matter. Last month Charter CEO Tom Rutledge said he was “still interested in wisely acquiring subscribers,” declining to comment specifically on the Comcast deal.

Comcast vowed to help more low-income families connect to the Internet this month as David L. Cohen, an executive vice president, began meeting with U.S. regulators who will review the agreement. U.S. Federal Communications Commission Chairman Tom Wheeler, a Democrat, may also seek to protect online video providers like Netflix Inc. from excessive charges for streaming content and use the deal to extend fast Web access to more residences and schools. Comcast needs approval from the FCC and antitrust officials at the Justice Department.

Billionaire John Malone bought a 27 percent stake in Charter last year through his holding company Liberty Media Corp. as he sought to consolidate the cable industry.

The company acquired Bresnan Broadband Holdings LLC in July for $1.63 billion, which helped add 63,000 residential customers and 16,000 commercial subscribers last quarter.

--With assistance from Edmund Lee in New York and Todd Shields in Washington.