Charter Urges Time Warner Cable Shareholders to Reject Comcast Deal

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Charter CEO Tom Rutledge

UPDATED: After failing to seal a deal itself, the cable firm, in which John Malone's Liberty Media owns 27 percent, also demands "that the TWC board engage in a full review of its strategic opportunities."

Cable operator Charter Communications on Friday urged shareholders of Time Warner Cable to vote against the proposed acquisition by Comcast at an upcoming special shareholder meeting.

"Charter urges TWC stockholders to reject the proposed Comcast merger and demand that the TWC board engage in a full review of its strategic opportunities," the company, in which John Malone's Liberty Media owns a 27 percent stake, said in a regulatory filing.

Charter earlier this year proposed its own slate of Time Warner Cable board members as it was stalking the company for a deal. In mid-February though, Comcast unveiled a $45 billion deal to acquire TWC.

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Charter CEO Tom Rutledge in first reactions said his company was still weighing its options for a possible response. It hasn't withdrawn its slate of directors. Rutledge a few weeks ago also declined to say whether he might urge regulators to challenge Comcast's takeover deal with TWC.

"I haven't taken a position," Rutledge told an investor conference back then. "We're observing them." He has also emphasized a couple of times that "we don't need M&A to be a successful company."

Charter's decision to urge shareholders to reject the Comcast merger may not be successful, but Liberty CEO Greg Maffei previously signaled that Charter could take a second look at all or parts of the company. On a recent earnings conference call, he said that if the Comcast deal doesn't get shareholder or regulatory approval, Charter could revisit an offer. But even if it does get approved, Comcast has said it would sell cable systems with about 3 million subscribers, which Charter could bid for.

Charter, in its Friday filing, cited the following reasons for shareholders to reject the Comcast deal: "higher regulatory risk," higher risk of delay and a "flawed" process of negotiating the deal "because of the failure of the TWC board of directors to consider and investigate alternatives."

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Charter also argued that the Comcast deal provides "reduced and uncertain value." It explained: "The merger consideration offered in the proposed Comcast merger was claimed to be worth $158.82 per TWC share at the time it was announced. However, the value of that merger consideration has declined substantially, and based on the closing price of Comcast stock on March 27, 2014, is now worth $141.16 per TWC share. This value will continue to be exposed to negative trading patterns over the entire pendency of the proposed Comcast merger, with the risk that TWC shareholders may receive less value for their shares than calculated pursuant to the exchange ratio approved by the TWC board on the date of the merger agreement."

Added Charter: "In contrast, the TWC board specifically demanded of Charter $160 per share, and publicly stated that they would not take a penny less than $160 and that the collar was a critical element."

Twitter: @georgszalai