Feb. 12--After Time Warner Cable rebuffed its initial offer, Charter Communications is taking the takeover fight directly to investors.
Charter is asking Time Warner Cable shareholders to replace the rival's current board of directors with a new slate of directors that includes St. Louis-area businessman and former Anheuser-Busch President Dave Peacock.
"This is Charter obviously trying to create a little more leverage," said Bruce Leichtman, president and principal analyst with Leichtman Research Group in Durham, N.H. "Charter sees (the takeover) as a way to continue to grow. One of the challenges for Charter has always been that they don't own that many markets like Comcast or Time Warner Cable do."
In January, Charter, the country's fourth-largest cable provider, made a $38 billion hostile takeover bid for the second-largest cable operator in the U.S., Time Warner Cable. Charter says combining the two companies could cut costs, and turn around Time Warner Cable's decline in video customers.
But New York-based Time Warner Cable rejected Charter's unsolicited offer of $132.50 per share and countered that it wouldn't consider a purchase offer below $160 per share.
Instead of upping its bid, Charter on Tuesday endorsed 13 independent candidates it's nominating for Time Warner Cable's board of directors, which would replace its current board.
Time Warner Cable says it has not yet set the date for its annual shareholders' meeting, which is when investors will vote on the proposal.
Charter also wants Time Warner Cable's shareholders to amend the company's bylaws to lock the size of the board at 13 members and repeal bylaw changes adopted by the board after July 26, 2012.
Time Warner Cable Chairman and CEO Rob Marcus reiterated his opposition to his rival's bid, saying Tuesday in a statement "we are not going to let Charter steal the company" with a lowball offer.
Some analysts have said Time Warner Cable's value for the company is too high.
"We don't believe (Time Warner Cable's) shares are worth $160 apiece, as management claims," Morningstar analyst Michael Hodel wrote in a recent analyst note. "As long as management holds to that valuation target, coming to a deal to sell the company will be difficult, in our opinion."
Among the 13 board members Charter is proposing for Time Warner Cable's board is Peacock, a Town and Country resident who is no stranger to fractious corporate mergers.
Peacock was chief marketing officer of Anheuser-Busch in St. Louis when the brewer mounted a fierce defense against a hostile takeover bid by Belgian brewer InBev in 2008.
After its initial bid was rejected, InBev sought to remove A-B's board of directors and replace the members with its own slate of nominees. That move was later discarded after A-B agreed to negotiations.
Last year, Peacock, an operating partner of private equity firm Huron Capital Partners LLC, formed a partnership with sportscaster Joe Buck and former St. Louis University basketball star Scott Highmark to open Jamba Juice franchises in Missouri and Kansas.
Peacock also is chairman of the St. Louis Sports Commission and a board member of the CityArchRiver 2015 Foundation, a group that's raising money to overhaul the Gateway Arch grounds in downtown St. Louis.
He declined to comment on Charter or Time Warner Cable.
Charter's other nominees for Time Warner Cable's board include Time Warner Cable's former chief technology officer James Chiddix, and Bruno Claude, former CEO of Switzerland'sCablecom.
Even if Charter successfully installs a majority of the board, the new directors have the duty to vote in the best interests of Time Warner Cable's shareholders and may not necessarily agree to Charter's buyout terms.
In 2010 and 2011, Airgas Inc., a chemical company, successfully fended off a takeover attempt from rival Air Products & Chemicals Inc., even after the bidding company placed three of its own nominees on the board. They all voted against the deal.
Charter moved its headquarters from Town and Country to Connecticut in 2012, but it still has a sizable workforce here -- about 3,100 employees -- and remains the area's dominant cable provider.
Leichtman said if Charter would combine with Time Warner Cable, there would be little impact for consumers in the St. Louis region
"Charter owns the St. Louis market and a few others," Leichtman said. "In the rest of the markets, they share, and they can't take advantage of economies of scale that way."
The Associated Press and Bloomberg News contributed to this report.
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