Whatever cable customers and regulators may think of Charter Communications’ plans to acquire Time Warner Cable for $56 billion, one small group of men has reason to celebrate.
Through a mix of golden parachutes, advisory fees and investment returns, a handful of cable executives, traders and bankers stand to reap enormous profits when and if the transaction closes.
Time Warner Cable
Robert D. Marcus, the chief executive of Time Warner Cable, is in line for a corporate exit package that is likely to exceed $100 million. Because he could well be terminated without cause after the deal closes — another way to say he would be leaving the company after selling it to a competitor — Mr. Marcus would be entitled to the salary, bonus and stock that he would otherwise have received over the coming years.
In that event, according to a securities filing, Mr. Marcus would receive roughly $4.5 million in salary, $23 million in bonuses and stock worth $74 million, for a grand total of about $102 million.
The sum is particularly notable when Mr. Marcus’s brief tenure is taken into account: He has been chief executive for less than a year and a half. Shortly after he became C.E.O., the company faced competing bids from Charter and Comcast. He ultimately struck a deal with Comcast last year that also would have given him a billowing golden parachute worth $80 million, but that agreement fell apart last month.
Charter came back quickly with an offer that valued Time Warner Cable at a more than 30 percent premium to its year-ago value, and the new deal was made. If the merger actually occurs, Mr. Marcus will cede the chief executive role to Charter’s boss, Thomas M. Rutledge, and is expected to leave the company.
Other Time Warner Cable executives are also in line for big paydays should they leave after a merger. Dinesh C. Jain, the chief operating officer, and Arthur T. Minson Jr., the chief financial officer, would receive golden parachutes worth about $32 million each. Marc Lawrence-Apfelbaum, the general counsel, would get $22 million. And Peter C. Stern, the chief product, people and strategy officer, could expect $18 million.
Time Warner Cable declined to comment.
In theory, golden parachutes are good for shareholders as well as executives, because they encourage C.E.O.s to strike deals instead of resisting to preserve their well-paid jobs.
“It does provide appropriate incentives for the executives,” said David F. Larcker, a professor at the Stanford Graduate School of Business. “This helps them presumably do the right thing for shareholders.”
And indeed, by overseeing the sale of Time Warner Cable for a blockbuster price, Mr. Marcus would be enriching not just himself and his fellow executives, but all shareholders.
Charter
A merger would benefit Mr. Rutledge of Charter, too. If he runs the combined company, he is likely to receive a raise.
Last year, Mr. Rutledge made $16 million in total compensation, a handsome sum, but less than many media executives have been earning recently. Brian L. Roberts, chief executive of Comcast, made $26.5 million last year, for example, and the compensation of James L. Dolan, Cablevision’s chief executive, exceeded $23.5 million. Television and movie studio executives received even more.
Yet as the head of an enlarged Charter, a company backed by the billionaire media mogul John C. Malone, Mr. Rutledge could join the ranks of the best-compensated managers on the planet. Mr. Malone’s chief executives occupied three of the top six spots on the Equilar 200 Highest-Paid C.E.O. Rankings, conducted for The New York Times. David M. Zaslav, the head of Discovery Communications, received $156 million in compensation last year. Michael T. Fries, chief executive of Liberty Global, earned $112 million. Gregory B. Maffei, chief executive of Liberty Media, got $74 million. All those sums include some long-term stock incentives.
Should Mr. Rutledge secure a long-term compensation package upon taking over an expanded Charter, his pay next year could rival that of Mr. Malone’s other top lieutenants. And if Mr. Rutledge is ousted after a deal is made, his golden parachute entitles him to about $111 million.
Bankers
Then there are the investment banks that advised both companies. Together, the banks will share an estimated $100 million to $150 million, according to Thomson Reuters and Freeman Consulting Services.
Roughly 60 percent of that pool will go to the banks that advised Time Warner Cable. Morgan Stanley, the lead adviser, will receive a larger slice, with Citigroup and two independent investment banks — Centerview Partners and Allen & Company — splitting the rest.
More banks are advising Charter, but not all will profit from the deal. Goldman Sachs and LionTree Advisors will split $30 million to $50 million. LionTree, a boutique bank that specializes in media deals and is the preferred banker for Mr. Malone’s companies, is run by Aryeh B. Bourkoff, the former head of Americas investment banking at UBS. Because LionTree has fewer than 100 employees, the deal — along with LionTree’s work on Charter’s related acquisition of Bright House Networks — will be a transformative payday for Mr. Bourkoff’s firm. Mr. Bourkoff declined to comment.
The other banks listed as advisers to Charter — including Guggenheim Partners, Bank of America Merrill Lynch and Credit Suisse — may receive little more than credit for the deal and a role in the financing.
Investors
While all the investors in Time Warner Cable can profit from Charter’s generous offer, one hedge fund stands apart. Paulson & Company, run by the billionaire John Paulson, owned 8.7 million shares of Time Warner Cable stock, according to a March 31 public filing.
While it is not known exactly what Mr. Paulson paid for that stake, a filing in September 2013 showed that he had already bought about half of it when the stock was trading below $140 a share. The implied price of Charter’s offer is $195.71 a share. That would mean a profit of at least $250 million. Paulson & Company declined to comment.
All told, excluding Mr. Paulson, the cable executives and advisers for the transaction stand to earn more than $300 million from the deal. If it collapses, the cable executives and advisers will receive nothing for their troubles. If it goes through, though, it’s a ton of money for a deal that came together in a matter of weeks.
“You have to wonder about the size of these packages,” Mr. Larcker said. “It does add up.”
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