By Soyoung Kim, Nicola Leske and Liana B. Baker
NEW YORK Jan 15 A number of Time Warner Cable
shareholders would support a merger with Charter
Communications Inc if Charter raises its current bid
for the larger rival to $41 billion or more, according to people
close to the matter.
Charter on Monday formally offered to buy Time Warner Cable
for $132.50 a share, or $37.3 billion, based on shares
outstanding. Time Warner Cable's board swiftly rejected that bid
as "grossly inadequate" and said it was open to a sale at $160
Several large shareholders, including at least two of the
company's top 10 investors, would back a sale to Charter in the
$145 to $150 per share range - or roughly $41 billion to $42
billion - the people said on Wednesday.
The shareholders told Charter and Time Warner Cable that
they would not accept Charter's current offer, said the people
close to the matter, who asked not to be identified because they
were not authorized to speak to the media.
"(Time Warner Cable) has had a dialogue with the top
holders. It's just a matter of price and $132.50 won't get it
done," said one Time Warner Cable shareholder who asked not to
A Time Warner Cable spokeswoman said in a statement "our
shareholders are confirming our position that the Charter
proposal is grossly inadequate."
A Charter spokesman declined to comment.
The price Time Warner Cable shareholders would seek also
depends on how much cash Charter would be willing to pay. It has
offered $82.54 a share in cash and the rest in its own stock - a
proposal that would give Time Warner Cable shareholders 45
percent ownership of the combined company.
Time Warner Cable has said it wants more cash and less
Charter stock, and made a counterproposal - a Charter bid of
$160 per share consisting of $100 per share in cash and the
remainder in stock.
"Composition will count for much. A higher cash component
could save Charter a few dollars in shareholders' eyes,
especially given that there are uncertainties about the synergy
level," said Steve Soranno, an equity analyst at Calvert
Investment Management, which has $13 billion under management
and owns Time Warner Cable shares.
Charter, backed by billionaire John Malone's Liberty Media
Corp, estimates synergies of $500 million in the first
year as a combined company with growth to $750 million over
time, the company said on Tuesday.
That figure came down from those Charter first communicated
to Time Warner Cable when it made its initial proposal in July.
Charter then told the larger rival that a combination would
generate $650 million of synergies in the first year increasing
to $1 billion over time, according to a person close to the
Its chief executive, Tom Rutledge, said on an investor call
on Tuesday that his $500 million-$750 million synergies estimate
"I am very comfortable that we can deliver more than $750
million of run rate synergies over time," Rutledge said.
Analysts, however, cautioned that savings would likely fall
short because getting bigger would not necessarily help the
combined company receive better programming rates from media
companies than Time Warner Cable already gets.
Synergies from capital spending reductions, lower annual
programming costs and other cuts in operating expenses are a key
consideration for Time Warner Cable shareholders, as they would
end up with a large proportion of the merged company's equity
under the current proposal.
Charter has been attempting to buy Time Warner Cable for six
months, but talks have not progressed, prompting Charter to
appeal directly to shareholders. Charter's executives were in
Boston on Wednesday meeting with Time Warner Cable investors as
part of a roadshow.
Since the start of Charter's pursuit, Time Warner Cable
shares have gained about 40 percent. On Wednesday, shares closed
above Charter's offer price, at $135.13. Charter shares have
increased about 20 percent over the same period.