Time Warner Cable (TWC) is playing defense against Charter Communications in the $61 billion takeover battle that has officially broken into the public realm. The latest is that the quiet, subtle flirting attempted by Charter hasn’t convinced Time Warner Cable’s board, who head up the nations second largest cable company, to climb in bed with the nations fourth largest cable firm. Charter, not to be easily denied, has decided to ditch the charm and has decided to employ other measure to attain the object of its desire. In a sort of corporate date-rape approach, Charter has decided to try and reduce the power of Time Warner Cable’s mind (its board) and approach the body (shareholders) directly.
In a January 14 conference call, Charter tried to sell its offer directly to the shareholders of TWC. The strategy appears to be one where Charter is needling away at the TWC’s reluctance to go all-digital. This, combined with other digs is being followed up by Charters $61 billion in an attempt to get shareholders to pressure TWC’s board to the negotiating table.
Time Warner Cable has balked at the offers to date, replying in an almost offended manner and calling the offers, “grossly inadequate.” Although the leadership of TWC has stated that it is not for sale, as is the case in the business world, they quickly followed up with what amounts to, “but, for the right price, anything is possible.” That price however is significantly higher than the latest Charter offer which is lingering in the low $130s per share. Time Warner Cable, clarifying what they would sell themselves for, has issued statements saying that $160 per share would be an amounts worthy of their consideration. Now that the “family” (shareholders) has been brought into the discussions however, Time Warner Cable has gone from playing hard to get, to having to play defense against the criticisms from Charter.
Charter has gone beyond simply criticizing TWC’s reluctance to go blazing into an all-digital setup. The aggressive suitor has gone as far as to characterize TWC’s approach as a “failed operating strategy.” Charter COO John Bickham tore into the business strategies of Time Warner Cable, choosing to focus on the analog vs digital issue, and tacking on some cheap shots about what he called “nickel and dime” fees used by TWC.
Time Warner Cable has fired back in defense of its business strategies along with highlighting its strengths in an effort to direct shareholders attention to positive aspects of the company. The defense strategy by TWC appears to be one of deflecting the criticisms by pointing out what it characterizes as it unique qualities, and focusing its shareholders attention back to the dollar amount of Charter’s offer.
Behind the scenes of Charter’s takeover move lies Jim Malone, and his Liberty Media which owns a 27% stake in Charter. Malone has not been shy in voicing his desire to see the two giant corporations unite and set their sights on world domination of their market. He spoke sentimentally about the “days of Ted Turner” when everyone worked together and provided the opportunity to operate and compete on a national scale. Now, with globalization in full swing, and markets essentially being international in scope, the famous billionaire dealmaker is salivating at a chance to go-global in a big way.
Whatever the final outcome of this throw-back to the M&A days is, for the time being Charter’s decision to go public with details of the negotiations has forced Time Warner Cable to play a little defense. The fact that the TWC share price continues to inch upward shows that the market expects that the final price will be somewhere closer to the $160 asking price. The wildcard seems to be how badly Malone, Liberty Media, and ultimately Charter want Time Warner Cable, and how much they will be willing to fork over to make that a reality.
In the end, a little time and a whole lot of money will influence just how this takeover drama plays itself out.
By Daniel Worku