A 300-plus page proxy filing with the Securities and Exchange Commission offers intriguing detail on the fast-moving negotiations that led to Comcast’s $45.2 billion merger pact with Time Warner Cable.
Thursday’s filing underscores the windfall that is in store for TW Cable CEO Rob Marcus. He stands to make $79.8 million in severance, bonus and stock coin if the sale is completed — not a bad payday for serving less than two months as chairman-CEO prior to the sale announcement. (Marcus had been TW Cable’s chief operating officer before he took over the top job as of Jan. 1 from Glenn Britt, who stepped down for health reasons.)
The narrative of the negotiations laid out in the filing also reinforces Comcast’s stealthy approach to sealing the deal, unveiled Feb. 13, with TW Cable under the nose of Charter Communications.
Comcast and Charter, which counts John Malone’s Liberty Media as its largest shareholder, had a series of “intensive discussions” for jointly making a bid for TW Cable as late as early February before discontinuing those discussions on Feb. 4, according to the filing. Later in the day on Feb. 4, Comcast and TW Cable began stepped up conversations about the framework of a deal.
TW Cable pushed Comcast to agree to a breakup fee out of concern that the union of the nation’s No. 1 and No. 2 cable operators would not be approved by federal regulators. Comcast successfully resisted the breakup fee but offered a significantly higher price than the $132.50 per share that Charter had offered. Comcast’s final price wound up at $158.82 per share, close to TW Cable’s $160 per share asking price.
The pursuit of TW Cable began in earnest last May, when Charter chief Tom Rutledge and Liberty’s Malone and Greg Maffei initiatied several meetings with TW Cable execs, including Britt, Marcus and chief financial officer Arthur Minson.
The execs met several times between May 22 and July 9 to discuss a possible deal. Word of the talks surfaced in media reports in June.
TW Cable had concerns about Charter’s ability to finance a transaction, according to the filing. TW Cable’s board reviewed the discussions during a June 21 conference call and opted not to pursue further discussions. That rebuff sparked a more aggressive approach by Charter later in the year.
Meanwhile, Comcast had been having discussions during this time with Charter about participating in the bid. But on June 27, lawyers for Comcast and TW Cable met to discuss possible legal and regulatory hurdles to a combination of the two cable giants.
On July 10, Charter’s Rutledge sent an unsolicited cash-and-stock offer of about $114 a share to TW Cable’s Britt. That was rebuffed after a conference call of the TW Cable board of directors, out of concern about the financing ability and also about the volatility of Charter’s stock price.
Things were quiet until Oct. 15 when Comcast chief Brian Roberts met with Marcus (who by then had been designed Britt’s successor as CEO) to discuss a possible acquisition. Comcast CFO Michael Angelakis met with Marcus on Oct. 17 to continue the discussion. But on Oct. 23, Roberts and Angelakis told Marcus in a phone call that Comcast was not prepared to discuss a transaction in the near term.
The following day, Charter’s Rutledge sent a letter to Marcus with a sweetened offer of about $127 per share. That was rejected too. And on Nov. 25, lawyers for Comcast and TW Cable again met to discuss “certain legal issues that might arise” in a merger of the two.
In December, there was much back and forth between Charter and TW Cable. On Dec. 26, the TW Cable board voted to inform Charter that it would accept a deal valued at $160 a share — with $100 per share in cash and the rest in Charter stock. The following day, Charter broke off talks, saying the sides were too far apart on price.
But in late December and early January, Charter and Comcast resumed discussions about a Comcast participating in the bid for TW Cable. On Jan. 7, while attending the Consumer Electronics Show in Las Vegas, Marcus had separate meetings with Rutledge and with Roberts.
Later that week, Roberts let Marcus know that Comcast’s discussions with Charter on a joint bid had “intensified.”
Charter went public on Jan. 13 with an offer that it valued at $132.50 per share, with a cash component of about $83.
Between that time and Feb. 4, Charter and Comcast had discussions about a joint bid that would have allowed Charter to offer a higher price. The day after those talks broke off, on Feb. 5, Liberty’s Malone called N.J. Nicholas, the lead independent director on the TW Cable board, to discuss a “more collaborative path” to combining Charter and TW Cable. But by then, Roberts and Marcus had fired up conversations that continued nearly round the clock — even while Roberts was in Sochi, Russia for the Winter Olympic games until the merger agreement was signed Feb. 12.
During this period, Charter was vocal in making its case for the takeover on Wall Street and in the media. On Feb. 11, as Comcast and TW Cable execs were reviewing drafts of the merger agreement, Charter upped the ante of its unsolicited takeover bid by releasing its nominations for a slate of 13 independent directors to replace TW Cable board members.
On the same day the TW Cable-Comcast merger agreement was signed, the sides also took care of more mundane NBCUniversal business, signing long-term carriage extensions on TW Cable for NBC Sports Network and Golf Channel, as well as NBC’s 10 O&O stations.
In addition to Marcus’ golden parachute, TW Cable’s Minson stands to reap $27.1 million in cash, stock and bonus payments if the deal goes through.
The other winners, as always, are the financial institutions that advised on the deal. Among the payouts TW Cable will make are $25 million to Allen & Co., $36 million to Citigroup and $36 million to Morgan Stanley. Comcast will pay $27 million to JP Morgan Chase & Co., according to the filing.