Charter Nominates Time Warner Cable Board Slate for Takeover

Charter Communications Inc. (CHTR) made its boldest move yet to buy Time Warner Cable Inc. (TWC), nominating a full slate of board members as it seeks to usher the second-largest U.S. cable company to the bargaining table.

In addition to nominating 13 candidates to replace Time Warner Cable’s directors, Charter proposed amendments to the company’s bylaws, according to a statement today. The changes would limit expansion of the board and repeal bylaws adopted by directors after July 26, 2012.

Time Warner Cable Chief Executive Officer Rob Marcus rebuffed Charter’s $132.50-a-share offer in January, saying he was open to a deal at $160 a share, a difference of about $7.5 billion excluding debt. Charter, the fourth-largest U.S. cable carrier, has said a merger would help the companies save money on programming and technology as the industry adjusts to lower demand for cable TV.

“It is clear from our meetings with Time Warner Cable shareholders that there is an overwhelming desire to combine these two companies,” Charter CEO Tom Rutledge said in the 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.”

Charter’s Nominees

Time Warner shareholders can vote on the proposed nominees at the company’s annual meeting this year. The date hasn’t been announced.

“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,” Marcus said in a statement. “We are not going to let Charter steal the company.”

Charter’s nominees include a clutch of cable executives, such as Dexter Goei, James Chiddix and Bruno Claude, as well as veterans of private equity and banking. The company also nominated media executive Lisa Gersh, the former CEO of Martha Stewart Living Omnimedia Inc. who abruptly left the company at the beginning of last year.

Even if Charter successfully installs a majority of the board, the new directors have the duty to vote in the best interests of Time Warner Cable’s shareholders and may not necessarily agree to Charter’s buyout terms.

Airgas Lesson

In 2010 and 2011, Airgas Inc., a chemical company, successfully fended off a takeover attempt from rival Air Products & Chemicals Inc., even after the bidding company placed three of its own nominees on the board. They all voted against the deal.

In an interview just after Charter went public with its offer on Jan. 13, Marcus envisioned a similar outcome for his company.

“I don’t know how they think that any board that would result from a proxy fight -- if that’s what they have in mind -- would come to any different conclusion than what we did,” he said.

Shareholders would be satisfied with an offer between $140 and $150 a share, according to a Bloomberg survey of investors and analysts last month.

At today’s close in New York, Time Warner Cable fell less than 1 percent to $134.90, while Stamford, Connecticut-based Charter gained less than 1 percent to $137.90.

After losing 825,000, or 6.8 percent, of its TV subscribers last year, New York-based Time Warner Cable is planning to use technology and a more user-friendly interface to win back customers. Marcus announced a plan last month to add 1 million residential customers over the next three years by improving customer service and technology. Time Warner said it will begin increasing Internet speeds and add video- recording features to customers in Los Angeles and New York, its two biggest markets.

Comcast Involvement?

Comcast Corp., the largest U.S. cable company, has examined buying some of Time Warner Cable’s markets, including New York City, New England and Charlotte, North Carolina, should Charter successfully complete a deal, people with knowledge of the matter said last month.

John Malone, chairman of Liberty Media (LMCA) Corp., could also step in to help sweeten the bid. He owns 27 percent of Charter through Liberty Media, which has said it would want to own a similar stake in the combined company.

Charter’s board slate for Time Warner Cable also includes Isaac Corre, a visiting lecturer at Harvard Law School; Marwan Fawaz, former CEO of Motorola Mobility Inc.’s home division; Franklin Hobbs, chairman of Ally Financial Inc.; Neil Morganbesser, CEO of DelMorgan & Co.; Eamonn O’Hare, a former CFO of Virgin Media Inc.; David Peacock of Huron Capital Partners LLC; Michael Salvati, president of Oakridge Consulting Inc.; Irwin Simon, president of Hain Celestial Group Inc.; and John Welsh III, president of Avalon Capital Partners LLC.

To contact the reporter on this story: Edmund Lee in New York at elee310@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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