Charter Proposes $61 Billion Acquisition of Time Warner Cable

Tom Rutledge COO - H 2011
Brendan Smialowski/Getty Images

Tom Rutledge COO - H 2011

UPDATED: Charter criticizes TWC for not taking its offer of a merger seriously enough, so it is taking its case to the shareholders of both companies. TWC calls an offer allegedly of $132.50 a share "grossly inadequate."

Cable operator Charter Communications disclosed Monday that it has been negotiating unsuccessfully to acquire Time Warner Cable but that it believes management is not interested in a deal so it will take its $61 billion proposal to TWC shareholders.

Charter, in which John Malone's Liberty Media owns a 27.3 percent stake, has been lining up financing in order to acquire the bigger company. Insiders say an offer made by Charter of $132.50 per share is too small, and TWC said late Monday it wants $160 a share. TWC stock closed at $132.40 on Monday.

Charter complained in a press release on Monday that, while executives from both companies met in December, "the flow of information has been one way."

Charter also said that TWC stock has benefited from widespread rumors that it was the target of an acquisition, so that Charter's offer -- which it says was in the low $130s -- represents a substantial premium to TWC's "unaffected" stock price.

"The premium is already reflected in the share price," Charter said Monday, adding that TWC's response to its proposal of merger leads it to believe that "there is no genuine intent from TWC's management and board of directors to engage in a merger agreement, and that it is prudent to bring the matter to shareholders directly."

TWC said late Monday that Charter first offered $114 per share in June, and then $127 in October. Without acknowledging that the most recent offer is, indeed, $132.50 a share, TWC called the bid "grossly inadequate" and a "nonstarter."

"While we are preserving all options going forward, we remain open to real engagement," CEO Thomas Rutledge wrote in a letter to TWC chairman and CEO Robert Marcus. "We are prepared to finalize a deal on an extremely expedited basis. We believe that time is of the essence to prepare our companies to meet the challenges of the industry, which is why we have decided to announce the status of our discussions to date to both sets of shareholders."

Marcus responded late Monday by writing: "On December 27 we made it clear to Charter that our board is open to a transaction with Charter at a price of $160 per TWC share, consisting of $100 cash and $60 per share of Charter common stock. … We gave Charter our bottom line, but rather than pursuing this path, Charter has chosen to go public with its third low-ball offer."

TWC had a market capitalization of $37.3 billion as of Monday's market close, compared with Charter's $14 billion. Charter says it has hired Goldman Sachs and LionTree Advisors as lead financial advisers.

Comcast recently engaged JPMorgan Chase to advise it on a possible rival bid for TWC, while Cox Communications has been rumored to also possibly be interested in acquiring TWC.