US cableco Charter Communications has had a US$132.50 offer for larger rival Time Warner Cable (TWC) rebuffed by the target’s board, which described the proposal as “grossly inadequate”.
Charter’s bid, which values TWC at US$37.3bn, is below…
US cableco Charter Communications has had a US$132.50 offer for larger rival Time Warner Cable (TWC) rebuffed by the target’s board, which described the proposal as “grossly inadequate”.
Charter’s bid, which values TWC at US$37.3bn, is below TWC’s closing stock price of US$133.18 last Friday.
The US$132.50 offer price comprises US$83 in cash and US$49.50 in Charter stock. Charter would also take on TWC’s US$25bn debt pile, giving the deal an enterprise value of US$62.3bn.
Charter has said that financing for a transaction has been fully negotiated with BofA Merrill Lynch, Credit Suisse, Deutsche Bank and Goldman Sachs, and that it can sign commitment letters in a matter of days.
The bidder was previously reported to have been looking to arrange a US$25bn financing package.
In a letter to TWC’s new head Rob Marcus, Charter’s CEO Tom Rutledge revealed that Charter made proposals to TWC’s board last June and October, but was rebuffed. Before Charter’s interest was reported, TWC’s stock was trading below the US$100 mark.
In a statement rejecting the offer, Marcus said: “Charter’s latest proposal is a non-starter. First and foremost, it substantially undervalues TWC and would represent an EBITDA multiple of approximately 7x, well below past transactions in the cable sector.”
Marcus went on to say that TWC’s board told Charter in late December that an offer of US$160 per TWC share – consisting of US$100 in cash and US$60 in Charter stock – was its “bottom line”.
Marcus finished by saying that Charter’s “low-ball offer” was trying to force TWC’s board into selling at a “grossly inadequate price”.
Rutledge argues that TWC’s US$160 price expectation “ignores a full 39% premium already reflected in Time Warner Cable’s stock (as of last Friday), widespread shareholder endorsement of a deal, and Time Warner Cable shareholders’ approximately 45% ownership in the upside of the proposed transaction”.
Morgan Stanley, Allen & Company and Citigroup are serving as financial advisers to Time Warner Cable, and Paul, Weiss, Rifkind, Wharton & Garrison is its legal counsel.
Goldman Sachs and LionTree Advisors are serving as lead financial advisers to Charter. Guggenheim Securities, BofA Merrill Lynch, Credit Suisse, and Deutsche Bank are also advising. Law firms Wachtell, Lipton, Rosen & Katz and Kirkland & Ellis are also representing Charter.
