Time Warner Cable Shareholder Sues to Stop Comcast Deal

A Time Warner Cable Inc. (TWC) shareholder sued to block Comcast Corp. (CMCSA)’s proposed $45.2 billion takeover, saying the merger of the two biggest U.S. cable TV companies faces high regulatory hurdles and was the result of unfair dealing.

The goal of the lawsuit is to stop the “sale of the company at an unfair price through an unfair and self-serving process to Comcast,” investor Breffni Barrett said in a complaint filed today in New York State Supreme Court in Manhattan. Barrett is seeking to sue on behalf of Time Warner Cable shareholders.

Related:

A tie-up between Philadelphia-based Comcast and New York-based Time Warner Cable would face tough scrutiny from the Federal Communications Commission, according to Craig Moffett, an analyst at MoffettNathanson LLC. The merged company would account for almost three-quarters of the cable industry, data from the National Cable Television Association show.

Time Warner Cable investors will receive 2.875 Comcast stock for each of their shares, the companies said yesterday. The purchase values each Time Warner Cable share at $158.82, or 17 percent more than its closing price Feb. 12. The transaction, subject to approval by stockholders and regulators, is expected to be completed by the end of 2014.

“Since rumors first leaked in mid-2013 about several companies interested in acquiring Time Warner, it has been reported that Time Warner failed to engage in good faith negotiations,” Barrett said in the complaint. The sales process was “woefully deficient” and the bid failed to take into account the company’s “positive momentum going forward,” the lawyers said.

‘Immediate Benefits’

Time Warner Cable management, meanwhile, would receive “immediate benefits from the closing of the transaction,” including more than $60 million in special payments, Barrett alleged.

The merger also would bring Comcast’s subscribers to about 30 million, the investor said in the lawsuit.

“Given Comcast’s dominance in the cable industry, Time Warner’s merger with Comcast raises antitrust issues that another potential acquirer, like Charter for example, may not have faced,” Barrett said. They said the deal will probably face scrutiny from both the FCC and the U.S. Justice Department.

Comcast trumped a bid from Charter Communications Inc. (CHTR) and its billionaire backer John Malone, who had courted Time Warner Cable for months.

Joli Plucknette-Farmen, a spokeswoman for Time Warner Cable, didn’t immediately respond to an e-mail seeking comment on the complaint.

The case is Barrett v. Time Warner Cable Inc., 650507/2014, Supreme Court of the State of New York, County of New York (Manhattan).

To contact the reporter on this story: Christie Smythe in New York State Supreme Court in Manhattan at

csmythe1@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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