And they’re off…The FCC officially started its informal 180-day clock to review Comcast‘s planned $42B acquisition of Time Warner Cable, and its side deals to transfer systems to Charter Communications and a new spinoff entity temporarily (I hope) called Spinco. FCC chairman Tom Wheeler and his four fellow commissioners set an August 25 deadline for comments and petitions to deny the applications. Parties must respond by September 23, and replies to those comments are due October 8. Although the FCC wants to reach a decision within 180 days, regulators often stop the clock if they need additional time to sort through issues on major deals.
Stamford, CT and Philadelphia, PA – May 15, 2014 – Charter Communications, Inc. (Nasdaq: CHTR) and Comcast Corporation (Nasdaq: CMCSA, CMCSK) today announced that former Insight Communications, Inc. co-founder and CEO and 40-year cable industry veteran Michael S. Willner has agreed to serve as President and Chief Executive Officer of “SpinCo,” the new cable company that will be spun off from Comcast upon completion of the Comcast – Time Warner Cable merger and the Comcast – Charter transactions. Willner will oversee the operations of SpinCo, which will serve approximately 2.5 million customers in Alabama, Indiana, Kentucky, Michigan, Minnesota, Tennessee and Wisconsin.
In this edition of the podcast, Deadline’s executive editor David Lieberman and host David Bloom recap Deadline’s annual report on the most out-of-whack paydays for CEOs in media. Who got paid the most compared to their own top colleagues this past year? We’ll also jump on the news carousel with big deal-related stories affecting All3Media, Apple and Alibaba; and decide what to make of Liberty’s John Maffei statement that Charter is still looking for more cable buys after its $20 billion deal with Comcast.
This is one reason why Liberty Media says today that it will spin off its 26% ownership stake in Charter along with other assets in a publicly traded entity to be called Liberty Broadband. John Malone’s company originally planned to have a tracking stock. But the change will offer investors “greater choice, enhanced transparency, [and is] well timed with Charter’s agreements with Comcast,” Liberty CEO Greg Maffei told analysts. Charter will buy 1.4M subs from Comcast and pick up a 33% stake in a new company (temporarily called SpinCo) with 2.5M subs. That will make Charter “first stop for other cable sales,” Maffei says. The dealmaking process will be “made more easy by having a separated Liberty Broadband stock.”
In this week’s podcast, Deadline’s executive editor David Lieberman and host David Bloom recap one heck of a week in the business of providing services that looks more or less like television across all kinds of delivery platforms. The NCTA cable-TV conference opened in Los Angeles, attracting numerous big-name speakers such as the FCC chairman, but big deals also seemed to be breaking out everywhere. There was talk of a massive deal between AT&T and DirecTV Networks; a $20-billion swap of subscribers between Charter and Comcast, and Viacom’s $757 million acquisition of the UK’s Channel 5. Along the way, DreamWorks Animation’s Jeffrey Katzenberg seemed to write off his core business, and got roundly whacked by another media mogul, Jeff Bewkes of Time Warner. In a word, “ouch.”
Charter CEO Tom Rutledge seemed a bit like Spinal Tap’s Nigel Tufnel talking about his amp going to 11 when CNBC’s Jon Fortt asked exactly the right question in a panel today at the National Cable Show: What changed to make him support Comcast’s $45B acquisition of Time Warner Cable, which Charter opposed last month saying would leave Comcast controlling “nearly 40 percent of the broadband market, around 33 million TV subscribers and a major programmer in NBCUniversal”? The real answer is that Charter was bought off this week when Comcast agreed to sell it many of the subs it had already promised to divest, making Charter the industry’s No. 2. Rutledge couldn’t say that, of course. Instead he avoided the core issue and said that “It’s a smaller deal from Comcast’s perspective and from an organization of the industry perspective it’s a much better outcome.” The companies “are committed to serving their communities and their employees and their customers.”
Comcast CEO Brian Roberts was a little smoother in addressing a question about concentration concerns raised by critics including Sen. Al Franken (D-Minn.). “When you net this all out, we’re buying 7M net customers” — …
2ND UPDATE, 12:25 PM: The WGA West has weighed in on the divestiture plan between Comcast and Charter — and it isn’t mincing words. Here’s the guild’s just-released statement — judge for yourself: “Today’s announcement from Comcast would, in essence, lead to the creation of a three-company cable cartel. Masquerading as subscriber divestitures, the agreement with Charter brings together the three largest cable providers, who account for 38% of cable subscribers and 45% of Internet subscribers. The decision of these three powerful companies to divide markets and share ownership of subscribers through a new publicly traded corporation is unprecedented and adds to the mounting evidence against the Comcast-Time Warner Cable merger.”
UPDATED: Looks like Charter will become the cable king of middle America, while Comcast tightens its hold on major markets, in this morning’s deal. Comcast will pick up Charter systems in California, New England, Tennessee, Georgia, North Carolina, Texas, Oregon, Washington and Virginia. Meanwhile, Charter will acquire Time Warner Cable franchises in Ohio, Kentucky, Wisconsin, Indiana, and Alabama — and manage others in Michigan, Minnesota, Indiana, Alabama, Eastern Tennessee, Kentucky and Wisconsin that it will partly own in a new Comcast spinoff company. Here’s the map the companies released showing holdings for Charter and the new Charter-managed spinoff from Comcast (for now referred to as “SpinCo”) after the deal, which CEO Tom Rutledge says will make his company No. 1 in 10 states.
PREVIOUS, 3:18 AM: The terms pretty much match earlier reports about the companies’ discussions. Assuming the feds approve Comcast’s $45B acquisition of Time Warner Cable, the cable giant would: (1) Sell systems with 1.4M TWC subs to Charter, making it the No. 2 operator. (2) Swap with Charter systems that include 1.6M subs. (3) Create a spinoff company with 2.5M subs that would be 33% owned by Charter. “The realignment of key cable markets achieved in these transactions will enable Comcast to fill in our footprint and deliver operational efficiencies and technology improvements,” Comcast CEO Brian Roberts says. While the companies didn’t put a dollar value on the deals, analysts have estimated it at about $20B. Comcast and Charter will disclose more info later this morning in a call with analysts.
Here’s their release:
The combination of system sales and swaps valued at $20B would affect nearly 5.6M cable subscribers — and would remove Charter as a potential obstacle to Comcast‘s $45B acquisition of Time Warner Cable — Financial Times reports. Word of a possible deal has been circulating for days, but the paper, citing “people familiar with the matter,” now says the companies are “close to agreeing” to the complicated transaction, perhaps this week. It’s all contingent on federal approval for the mega-deal to combine the nation’s two largest cable providers. The new agreement has three components: Charter would buy from Comcast systems now owned by TWC that include 1.4M subs. The cable giant would create a new company with 2.5M subs, in which Charter would have a 35% stake. And Comcast and Charter would swap 1.65M subs. FT says it’s “unclear exactly which subscribers will be swapped or the exact geographies under discussion.” Comcast wants to increase its clout in major markets, including New York and Los Angeles: The company has said that it sees big growth opportunities in offering business services.
It’s not WrestleMania, but Time Warner Cable shareholders can expect more excitement than usual at their annual meeting this year: The company’s preliminary proxy, out this morning, includes proposals from Charter Communications and other investors that could create problems for TWC management as it tries to sell the No. 2 cable giant to No. 1 Comcast.
Charter — which was the runner up in the bidding contest, but hasn’t given up — wants to change the by-laws to fix the size of the TWC board at 13 instead of allowing directors to change it when they want. Charter plans to propose its own TWC board slate, and no doubt wants to ensure that directors don’t boost the size of the body to dilute the impact if the challengers win. TWC naturally urges shareholders to reject Charter’s candidates, and the proposal. “Recruiting qualified candidates is a challenging and time-consuming process, and the Board of Directors believes that it is in the best interests of the Company’s stockholders for the Board to retain the flexibility to either increase its size if a highly-qualified candidate becomes available or to decrease its size if a director declines to seek reelection or for other reasons,” the company says.
Charter also wants TWC investors to support a change in the by-laws to repeal any changes made without shareholder support after July 26, 2012. Here, too, TWC’s board urges a “no” vote saying that the resolution “represents no …
In this week’s podcast, Deadline’s Executive Editor David Lieberman and host David Bloom wrap up all the business news out of CinemaCon, the big theater-owner convention that David Lieberman covered last week. Now that he’s back in Deadline’s Manhattan offices, David L. talks with David B. about the hot topics affecting the movie theater business, including a look at the state of the industry, whether movies and alcohol can mix, why it might be time for a discount ticket night, and why you can’t buy a movie ticket on Amazon.
The two Davids also discuss Charter Communications’ “astonishing” filing objecting to the Comcast-Time Warner Cable deal and why Reed Hastings might have some buyer’s remorse over his company’s interconnection pact with Comcast. They also look at whether now is finally the time for a DirecTV/Dish Network merger.
Returned today from the CinemaCon confab, so I’m just now getting a chance to catch up with Charter Communications‘ astonishing SEC filing that urges Time Warner Cable shareholders to support its $37B cash-and-stock bid over Comcast’s $45.2B all-stock offer. I don’t know if there’s enough in the proxy to derail the Comcast-TWC deal. But it’s sure to create some turbulence — if nothing else by giving ammo to class action lawyers who want to argue that the TWC board failed to faithfully represent shareholders’ interests when it stiff-armed Charter and embraced Comcast.
John Malone’s company is the largest shareholder in Charter Communications whose hostile bid for Time Warner Cable was trumped when Comcast stepped in with its $45.2B stock offer. But while Liberty recognizes that the No. 1 cable company has the upper hand, it won’t “take any option off the table” including “if the Time Warner deal is not able to be completed,” CEO Greg Maffei told analysts today. The big question now is “how onerous the conditions will be, not only for Comcast but for the industry as a whole” to persuade Justice Department and FCC officials to approve the deal. He also noted that since Comcast is just offering stock, which has slightly declined in value since it reached terms with TWC, “we’ll see what price actually gets paid.” Meanwhile, Maffei rules nothing out saying execs will watch “with interest” how the Comcast deal proceeds. Liberty and Charter have engaged in “some talk of other forms of consolidation….We certainly learned in this process that there were many investors interesting in investing in consolidation.” The likely loss of TWC doesn’t diminish Liberty’s interest in buying the minority stake in SiriusXM that it doesn’t already own. The recent offer was “not driven” by a desire to harness the satellite radio company’s cash flow to help support a cable acquisition. The SiriusXM offer is “the right deal for Liberty and SiriusXM shareholders.” If independent directors disagree, …
Time Warner Cable may be beyond the reach of Charter Communications, but CEO Tom Rutledge says he isn’t out of the deal game yet. Charter is “still interested in wisely acquiring subscribers,” he told analysts this morning, suggesting that he and his top shareholder, Liberty Media’s John Malone, are still hunting. And he may not have given up on TWC: Charter hasn’t withdrawn its proposed slate of independent directors for TWC, and Rutledge declined to say whether he might urge Washington regulators to challenge Comcast’s $42.5B all stock offer that outbid Charter. “I haven’t taken a position,” he says. In response to a different question he noted that government-required conditions on any deal “could have an impact on the business.” The CEO adds that consolidation can make the operation more efficient, but rejected the popular notion that a bigger company would find it easier to negotiate lower programming costs. “I’m not sure that Time Warner [Cable] and Charter together would change our scale from a programming cost perspective,” he says. Even with multiple deals to add smaller operators “it’s hard to put together scale that would meaningfully change it.” On other matters: Rutledge is unimpressed with Netflix‘s claim that Verizon and other broadband providers are slowing transmission speeds. “Netflix is putting themselves in a position to throttle their own network to gain sympathy,” he said without explanation. “It’s an interesting approach.” The CEO spoke with …
Brace yourself for a bitter fight over media conglomeration: The No. 1 cable company and owner of NBCUniversal has a deal with Time Warner Cable to buy it for stock valued at $159 a share, beating Charter Communications’ $132.50 cash-and-stock bid, CNBC’s David Faber reports at the news channel’s website. The deal is set to be announced tomorrow morning, he says. (Comcast owns CNBC.) Each share of TWC, which closed today at $135.31, would be exchanged for 2.875 Comcast shares, which closed at $55.24. That would translate into about $44.2B (not including debt) vs. Charter’s $37.4B bid, which TWC rejected as inadequate. If consummated, a deal would add TWC’s 11.2M video subscribers to Comcast’s 21.7M and give the cable colossus coveted franchises in Manhattan and Los Angeles.
This should add some excitement to Time Warner Cable‘s next shareholders’ meeting. Charter has several highly regarded cable execs — including former TWC Chief Technology Officer Jim Chiddix, former Charter CTO Marwan Fawaz, and Oxygen Media co-founder Lisa Gersh – in its collection of independent candidates for the No. 2 cable company’s board. They’d support Charter’s $61.3B (including debt) cash and stock takeover offer. In addition, Charter hopes to head off efforts by TWC to adopt anti-takeover protections. It proposes to fix the size of the board at 13 and repeal any by-law amendments made without shareholder approval since July 26, 2012, the last time TWC disclosed any change to its by-laws. “It is clear from our meetings with Time Warner Cable shareholders that there is an overwhelming desire to combine these two companies to increase Time Warner Cable’s competitiveness,” says Charter CEO Tom Rutledge. “Our purpose in this proxy contest is to enable shareholders of TWC to raise their voice, and to provide a very capable board who will hear them.” TWC says that Charter made a “grossly inadequate” bid by offering the equivalent of $132.50 a share; TWC considers $160 closer to the mark. “It is clear that Charter is nominating a slate of directors for the sole purpose of pressuring our Board into accepting the same lowball offer that it previously considered and unanimously rejected,” TWC chief Rob Marcus says. “Our Board remains focused on maximizing shareholder value. We are confident in our strategic plan, which was detailed publicly on January 30, and we are not going to let Charter steal the company.” TWC shares opened this morning up slightly at $136 — suggesting that investors believe that Charter, or someone, will offer more.
Here are Charter’s candidates for the TWC board with its description of their backgrounds and qualifications:
Comcast would snag New York City, New England, and North Carolina properties from Charter if it succeeds in buying Time Warner Cable, Bloomberg reports citing “people with knowledge of the matter.” Comcast and Charter “have a framework agreement” for what the No. 1 cable operator would pay, pegged to the ultimate price Charter negotiates if it can make a deal. Charter has offered $61.3B (including debt), or $132.50 per share — but TWC has rejected that, saying that its assets are worth at least $160. Charter is preparing to propose directors for the TWC board who would support its bid, the news service says. The report jolted Charter shares: They’re up nearly 7% in afternoon trading. TWC is slightly positive after slipping nearly 1% before the release. Although Comcast would not join Charter in its effort to buy TWC, a side deal would make it easier for the company to finance an acquisition. Charter plans to borrow about $20B for a deal. Investors have been expecting Comcast to enter the fray. “Charter is stretched in its acquisition proposal to TWC, and will likely need to offer even more to get a deal done,” Brean Capital’s Todd Mitchell says. An agreement with Charter would give Comcast “the markets it really wants” and it could do so “with little change in leverage ratios, and see the potential …
In this week’s podcast, Deadline’s executive editor David Lieberman and host David Bloom talk about pay-TV services from Amazon and Verizon; a chat with the CEO of MLB Advanced Media, which is also providing the backbone for the online subscription operations of WWE and Sony; the doubtful bears wondering how long Netflix can sustain this last quarter’s massive numbers; whether SiriusXM should cut Howard Stern’s $80 million annual paycheck; and why Carl Icahn thinks Apple needs to roll out a 4K TV, and fast. Oh, and they check in on Charter Communications’ latest maneuvers in its campaign to buy Time Warner Cable.
It’s a PowerPoint smackdown. Charter just posted one of its own to respond to Time Warner Cable’s slide deck explaining why it rejected the smaller cable company’s cash and stock offer of $132.50 a share or $61.3B (including debt), which it deems “grossly inadequate.” Charter says that shareholders should take the deal while they can because “TWC’s value to Charter is declining, driven by continued customer relationship and triple play subscriber losses and financing costs from further delays.” That contrasts with Charter’s results, expected to “continue to improve, with accelerating growth in 2014.” In rejecting the offer, Time Warner Cable discounts the potential advantages that shareholders would have owning 45% of Charter, the company says. Late last week TWC said that it will outline its operating plans on January 30. To Charter, that “slow response should at best concern shareholders as to what if any strategy exists today, and could reflect yet another delay tactic for a consensual deal.” Charter adds that it is “in contact with TWC shareholders” and its next steps “will be determined by the level of support shareholders demonstrate for this combination at a price that benefits both set of shareholders.”
In this week’s podcast, Deadline’s executive editor David Lieberman and host David Bloom take up Charter Communications’ $61.3 billion bid for Time Warner Cable; the potential impacts of an appeals court ruling throwing out FCC net neutrality rules; a stalling home-entertainment industry and Best Buy’s bad holiday. They also look at the surprising shakeup at the top of Yahoo, coming as it does just a week after the company’s big CES shindig. Now at least one much ballyhooed hire departs 15 months later after arriving and there are reports that at least another top executive is out.