By Shalini Ramachandran and Liz Hoffman
Charter Communications Inc. put forward a group dominated by
cable industry veterans and former investment bankers as candidates
for Time Warner Cable Inc.'s board at its annual shareholder
meeting this spring, opening the next phase of its battle to take
control of the second-biggest U.S. cable operator.
The nominations, for Time Warner Cable's entire board, make
clear that Charter is willing to go hostile in its efforts, after
eight months of trying to draw TWC to the negotiating table. Over
that period, TWC has rebuffed as too low three offers from Charter,
the fourth-largest cable company by video customers. Charter hopes
the nominations will put pressure on Time Warner Cable, which has
said that it won't negotiate on any price lower than $160 a share.
Charter's latest offer, which it made public in January, was
pitched at $132.50 a share.
"It is clear from our meetings with Time Warner Cable
shareholders that there is an overwhelming desire to combine these
two companies," Charter Chief Executive Tom Rutledge in a
statement. "Now is the time for the current Board and management of
Time Warner Cable to respond to their shareholders and work with us
to complete a merger."
In response, Time Warner Cable Chief Executive Rob Marcus said,
"It is clear that Charter is nominating a slate of directors for
the sole purpose of pressuring our board into accepting the same
lowball offer that it previously considered and unanimously
rejected. We are not going to let Charter steal the company."
Some Time Warner Cable investors said they were disappointed
that Charter hadn't raised its offer, warning it could weaken the
momentum of Charter's proxy fight. Charter is likely to wait a few
weeks until later in the proxy fight campaign before bumping the
price, a person familiar with the matter has said.
Recent history suggests that corporate suitors undertaking proxy
battles rarely succeed. Since 2006, only four of 27 corporate
aggressors that launched board fights to press a hostile bid ended
up owning their intended target, according to FactSet--a success
rate of about 15%. And the four that won ended up getting control
through friendly negotiations, including by raising their offers.
One is still pending: Men's Wearhouse Inc.'s pursuit of rival
suit-seller Jos. A. Bank Clothiers Inc.
Far more often, the hostile bidder lost a shareholder vote or
gave up and withdrew its slate. Roche Holding Ltd., for example,
used a proxy fight at Illumina Inc. in 2012 to press its $6.5
billion takeover of the gene-sequencing firm, but shareholders
rejected its nominees. Exelon Corp.'s $7.5 billion pursuit of NRG
Energy Inc. in 2009 ended the same way.
Even if Charter's slate wins, a deal isn't guaranteed. The new
board would be legally required to set aside any allegiance to
Charter and evaluate the bid independently, and would be
hard-pressed to recommend the offer without a detailed financial
analysis showing it is fair.
Charter's proposed slate has a deep M&A bench, including at
least three ex-bankers. One candidate, Neil Morganbesser, is a
corporate lawyer turned banker with stints at law firm Wachtell
Lipton Rosen & Katz, Morgan Stanley and Bear Stearns & Co.,
where he headed the bank's Asian and West Coast merger group.
The list includes Isaac Corre, who recently left hedge fund Eton
Park Capital Management LP, where he was responsible for
event-driven investing, a strategy that often involves betting on
whether deals get done.
The slate also includes a number of cable veterans, including
James Chiddix, who is close to Mr. Rutledge, having served as chief
technology officer of Time Warner Cable from 1998 to 2001, a period
when Mr. Rutledge also worked at the company. Others with
experience in the cable industry include Bruno Claude, the former
CEO of Switzerland-based Cablecom; Marwan Fawaz, who formerly
worked at Charter as chief technology officer; and Eamonn O'Hare, a
former chief financial officer of Virgin Media Inc., which last
year was acquired by John Malone's Liberty Global Inc. Mr. Malone's
Liberty Media is Charter's largest shareholder.
Time Warner Cable shareholders will have the opportunity to vote
for those nominees at the company's annual meeting later this year.
All 13 of Time Warner Cable's directors are up for re-election. Six
of the 13, including new CEO Rob Marcus, are former executives of
Time Warner Inc., the entertainment company that until 2009 was
TWC's parent. These include Nick Nicholas Jr., who was a co-CEO of
Time Warner between 1990 and 1992; Don Logan, who oversaw Time
Warner Cable as a senior Time Warner Inc. executive between 2002
and 2005; and Wayne Pace, a former Time Warner Inc. CFO.
Peter Haje, another director who long worked at Time Warner, was
also formerly a partner at Paul, Weiss, Rifkind, Wharton &
Garrison, a law firm where current Mr. Marcus got his first
full-time job.
In a statement, Time Warner Cable noted that it is "the only
large U.S. cable company not controlled by a family or major
shareholder and our Board reflects that independence." The company
added that the directors' "backgrounds and experiences are richly
diverse" and all "are singularly focused on maximizing value for
Time Warner Cable's shareholders."
Write to Shalini Ramachandran at shalini.ramachandran@wsj.com
and Liz Hoffman at liz.hoffman@wsj.com
Order free Annual Report for Roche Holding AG
Visit http://djnweurope.ar.wilink.com/?ticker=CH0012032048 or
call +44 (0)208 391 6028
Order free Annual Report for Roche Holding AG
Visit http://djnweurope.ar.wilink.com/?ticker=CH0012032113 or
call +44 (0)208 391 6028
Order free Annual Report for Charter Communications, Inc.
Visit http://djnweurope.ar.wilink.com/?ticker=US16117M3051 or
call +44 (0)208 391 6028
Order free Annual Report for Exelon Corp.
Visit http://djnweurope.ar.wilink.com/?ticker=US30161N1019 or
call +44 (0)208 391 6028
Order free Annual Report for Illumina, Inc.
Visit http://djnweurope.ar.wilink.com/?ticker=US4523271090 or
call +44 (0)208 391 6028
Order free Annual Report for The Men's Wearhouse, Inc.
Visit http://djnweurope.ar.wilink.com/?ticker=US5871181005 or
call +44 (0)208 391 6028
Order free Annual Report for NRG Energy, Inc.
Visit http://djnweurope.ar.wilink.com/?ticker=US6293775085 or
call +44 (0)208 391 6028
Order free Annual Report for Roche Holding AG
Visit http://djnweurope.ar.wilink.com/?ticker=US7711951043 or
call +44 (0)208 391 6028
Order free Annual Report for Time Warner, Inc.
Visit http://djnweurope.ar.wilink.com/?ticker=US8873173038 or
call +44 (0)208 391 6028
Order free Annual Report for Time Warner Cable, Inc.
Visit http://djnweurope.ar.wilink.com/?ticker=US88732J2078 or
call +44 (0)208 391 6028
Subscribe to WSJ: http://online.wsj.com?mod=djnwires