By Shalini Ramachandran
Comcast Corp. began detailed merger discussions with Time Warner
Cable Inc. just a few weeks after TWC was first approached about an
alternative deal by Liberty Media Corp. and its Charter
Communications Inc. affiliate last May, a regulatory filing showed
Thursday.
Months of off and on negotiations led to Comcast's agreement to
buy TWC for $45.2 billion in stock last month, thwarting Charter's
monthslong pursuit. In Thursday's filing, the discussions between
the various companies were detailed. While the broad outlines of
the discussions were previously known, the filing cast new light on
when Comcast got involved in the takeover battle. Liberty and
Charter's approaches to TWC were reported in mid June, but
Comcast's interest stayed quiet until late November.
The filing also said that TWC Chief Executive Rob Marcus stands
to gain about $80 million in "golden parachute" compensation if his
contract is terminated after the deal goes through. Mr. Marcus
became CEO on Jan. 1, with a three-year contract.
Liberty and Charter made their first approach to Time Warner
Cable on May 22, the filing said. TWC's board discussed the
approaches on May 28 and June 21, concluding that Charter was
unlikely to "make a proposal that would be attractive to TWC
stockholders."
Comcast soon entered the picture. The filing notes that Comcast
Chief Executive Brian Roberts and Time Warner Cable's then-CEO
Glenn Britt had discussed a merger of the two companies "from time
to time" over the years. It doesn't say when talks recommenced,
other than to note that after discussions between top executives in
"mid-2013," lawyers for the two companies met on June 27 to discuss
a "framework" for a deal that could "address potential concerns of
regulators."
Comcast is the biggest cable operator in the U.S. by
subscribers, while TWC is the second biggest, and regulatory
approval remains the deal's biggest uncertainty.
The filing doesn't mention the status of talks between Comcast
and TWC after the June 27 meeting until a meeting in mid-October
between Mr. Roberts and Mr. Marcus, TWC's then-No. 2 executive, who
in late July had been named to succeed Mr. Britt. After further
discussions over the next few days, Mr. Roberts indicated to Mr.
Marcus on Oct. 23 that Comcast "was not prepared to enter into such
a transaction in the near term," according to the filing.
Meanwhile Charter was continuing its pursuit. Time Warner Cable
continued to favor a Comcast deal, worried that a merger with
Charter would burden the combined company with too much debt.
But Comcast had been also talking with Charter and Liberty since
at least mid-2013, the filing showed, discussing "a range of topics
relating to their respective businesses."
The filing said Mr. Roberts told Mr. Marcus in mid-October that
Comcast had discussed possibly participating in Charter's bid for
TWC. Throughout late 2013 and the early part of this year, Comcast
and Charter engaged in deeper discussions about a deal where
Comcast would back a Charter bid for TWC, in return for some Time
Warner Cable systems after a deal was completed.
Charter continued to seek engagement from Time Warner Cable,
making several offers that were each rejected.
Throughout early January, Mr. Roberts and Comcast Chief
Financial Officer Mike Angelakis continued to keep TWC's Mr. Marcus
informed of how Comcast-Charter talks were intensifying. On Jan.
12, Comcast management told its board that due to the progress made
in its talks with Charter, they preferred that approach so long as
the two companies were able to come to acceptable terms. The next
day, Mr. Angelakis told Mr. Marcus that Comcast didn't want to
pursue a stand-alone bid for Time Warner Cable but would be
interested in buying some assets from the company.
Mr. Marcus indicated that TWC wasn't interested in such a deal,
because it would reduce the company's scale and competitiveness. In
a subsequent meeting in late January between Time Warner Cable and
Comcast executives, Mr. Roberts again reiterated that Comcast
wasn't interested in pursuing a Comcast-TWC deal, but thought
Comcast's backing of Charter could enable Charter to offer TWC a
higher price.
Throughout January and into early February, Comcast and Charter
continued to have "intensive discussions" but ultimately weren't
able to reach an agreement. On Feb. 4, talks broke down. The very
same day, Mr. Roberts contacted Mr. Marcus to re-engage in
discussions toward a Comcast-TWC deal. But he had a specific
condition: that Time Warner Cable agree to certain measures
concerning regulatory matters, including no breakup fee if the deal
fell through or didn't get approved by regulators.
Liberty hadn't quite given up, however. On Feb. 5, Liberty Media
Chairman John Malone called TWC's lead independent director, Nick
Nicholas, expressing "interest in pursuing an alternative, more
collaborative path" toward a deal. Mr. Nicholas, according to the
filing, said TWC's board was sticking to the price it had set
publicly for selling the company. TWC had said it wanted $160 a
share, well above Charter's most recent offer of $132.50.
Meanwhile, in ensuing discussions between TWC and Comcast, Mr.
Marcus pushed for a breakup fee. However, Mr. Roberts continued to
reiterate that Comcast wouldn't be willing to agree to that.
Mr. Marcus, after consulting with Time Warner Cable's board,
told Comcast on Feb. 6 that Time Warner Cable would agree to a deal
with no breakup fee as long as Comcast offered a price around $160
a share. The final, all-stock deal was signed several days later,
valued at about $158.82 a share based on Comcast's closing price
Feb. 12.
Write to Shalini Ramachandran at
shalini.ramachandran@wsj.com
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