By Shalini Ramachandran, Martin Peers and Liz Hoffman
Charter Communications Inc. plans next week to nominate a full
slate of candidates for Time Warner Cable Inc.'s 13-member board,
say people familiar with the situation, setting in motion one of
the biggest recent hostile takeover bids.
Charter isn't likely to raise its offer for TWC at the same time
as putting forward the slate, the people said, despite expectations
among some investors of such a move. Instead Charter is likely to
wait a few weeks until later in the proxy fight campaign before
bumping the price, one of the people said. Meanwhile it would
likely continue trying to negotiate a deal privately.
Charter, the fourth largest cable operator by subscribers, has
been attempting to bring Time Warner Cable, the second biggest
cable company, to the negotiating table for a merger deal since
late last spring. It has made three offers so far, the most recent
at $132.50 a share, each rejected by TWC as being too low. Time
Warner Cable has said it wants a price of $160 a share and won't
negotiate with Charter otherwise.
All 13 of Time Warner Cable's board members are up for
re-election at the annual meeting this spring, presenting Charter
with a rare opportunity among recent hostile bidders, to take
control of the board. Other hostile bids have been hampered by
staggered boards, in which only one-third of seats open up each
year. Men's Wearhouse Inc., for example, has said it plans to
nominate two directors at Jos. A. Bank Clothier Inc., hoping to
press a $1.6 billion takeover bid. But a win would be largely
symbolic. Because Jos. A. Bank's board is staggered, Men's
Wearhouse would have to win a second vote in 2015 to take
control.
A central point of Charter's proxy campaign will be that its
candidates would, if elected to TWC's board, make a priority of
evaluating Charter's offer. A vote for Charter's candidates, one of
the people said, would therefore be a vote for TWC to engage with
Charter. The identities of Charter's nominees couldn't be learned;
the deadline for nominations is Feb. 15.
How high Charter will raise its offer still isn't clear. Several
Time Warner Cable investors say they'd like around $145 a share.
Time Warner Cable shares were up 94 cents to $136.29 in after-hours
trading on Friday. At $145 a share, a deal would be worth about $41
billion excluding debt.
Even a clean win in the proxy fight wouldn't guarantee that a
deal gets done. The new board would have to independently evaluate
the offer, setting aside their allegiance to Charter. This
responsibility has tripped up hostile bidders before. Air Products
& Chemicals Inc. in 2010 won three board seats at Airgas Inc.,
which Air Products had been trying to buy. Once on the board, the
new directors recommended against the deal.
Charter's proxy nomination may also occur without clarification
of one big issue surrounding the monthslong takeover battle: the
role of Comcast Corp., the number one cable operator. Charter has
been negotiating a deal with Comcast in which Comcast would endorse
Charter's bid for TWC in exchange for an agreement to buy some of
TWC's systems in the event Charter is successful in buying Time
Warner Cable. The systems under discussion are some of TWC's east
coast systems, including those in the New York area.
Such a deal would be a big boost to Charter's hopes of winning
control of TWC, by removing Comcast as a potential rival bidder.
But despite expectations among some TWC investors that a
Comcast-Charter deal would be struck ahead of Charter's nomination
of its slate, an agreement isn't expected to be announced next
week, a person familiar with the situation said.
If Comcast and Charter reach a deal, Comcast isn't expected to
put money into a Charter bid upfront, or get involved with any
Charter-led proxy fight.
Dana Cimilluca contributed to this article.
Write to Shalini Ramachandran at shalini.ramachandran@wsj.com,
Martin Peers at martin.peers@wsj.com and Liz Hoffman at
liz.hoffman@wsj.com
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