MEDIA

In Time Warner Cable Deal, Charter Seeks National Heft

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The deal’s main backer, John C. Malone, is chairman of Liberty Media, which owns 27 percent of Charter. Rick Wilking/Reuters 
It was only 15 months ago that Charter Communications looked like a big loser in the race to add heft in the cable and broadband industry. Comcast, a rival, had swooped in with an audacious $45 billion bid for Time Warner Cable, appearing to end the prolonged takeover battle that Charter had been waging for the cable operator.
How different things look now.
Charter and its main backer, the billionaire media mogul John C. Malone, are on the verge of buying Time Warner Cable for about $55 billion, or roughly $195 a share in cash and stock, in a move that would help fulfill Charter’s long-held strategy to become a legitimate national player in the industry.
The deal — along with what appears to be an imminent acquisition of another cable operator, Bright House Networks — would make Charter the nation’s second-largest cable television operator, behind Comcast, and would give it more clout in negotiations with television groups over soaring programming costs.
It’s a significant turn of events for a company that looked like it had been beaten to punch then had to wait and wonder whether the Comcast deal would go through.
Tom Wheeler, chairman of the Federal Communications Commission, one of the agencies that would scrutinize the takeover.David Ramos/Getty Images 
“Charter was on the sidelines,” Amy Yong, a media analyst with Macquarie, said on Monday.
The acquisition would also be a personal victory for Mr. Malone, who sold the cable operator TCI to AT&T. For more than a decade, Mr. Malone had largely stayed away from the sector that made him his fortune. But more recently, he has become a vocal supporter of deal-making in the cable industry, saying several years ago: “There is more consolidation yet to be done.”
In March 2013, Mr. Malone’s Liberty Media agreed to buy a 27 percent stake in Charter, for $2.6 billion. In a statement at the time, Mr. Malone said that he and Liberty were “pleased with Charter’s market position and growth opportunities.”
Charter later said in a regulatory filing that it had floated the idea of a merger with Time Warner Cable on May 22, 2013, but the first whispers of a Charter-Time Warner Cable merger surfaced in June that year, in a proposed deal that was expected to begin a wave of consolidation in the cable industry. Several more offers from Charter followed in subsequent months. But it was not until January 2014 that Charter publicly offered $37.8 billion, or $132.50 a share.
Time Warner Cable promptly made it clear it was not interested in a deal at that price.
“Charter’s latest proposal is a nonstarter,” Robert D. Marcus, Time Warner Cable’s chief executive, said in a statement at the time. Mr. Marcus also said that Time Warner Cable had previously told Charter that it was open to a deal that valued his company at $45.7 billion, or $160 a share.
Tension escalated, with Charter nominating a full slate of directors to Time Warner Cable’s board. Charter also negotiated with Comcast about a deal in which it would acquire some of Time Warner Cable’s large markets if Charter were to buy Time Warner Cable.
But Comcast had different plans.

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In mid-February 2014, the company announced its own agreement to acquire Time Warner Cable for more than $45 billion, apparently scuttling Charter’s best-laid plans.
In what seemed like a desperate maneuver, Charter filed a proxy statement at the end of March with the Securities and Exchange Commission that challenged the Comcast-Time Warner Cable deal and urged Time Warner Cable shareholders to reject the merger. The filing cited, among other shortfalls, the lack of a regulatory breakup fee, which Charter said gave Comcast “no incentive to seek solutions” beyond the several limited commitments it had made previously.
Charter waited patiently.
Many industry experts initially expected the Comcast-Time Warner Cable deal to pass regulatory muster. But by early this year, after intense regulatory scrutiny and fierce opposition from consumer advocates and some lawmakers, prospects for the planned merger were dimming. In April, faced with strong signals that the merger would not be approved, Comcast abandoned the deal.
That gave Charter the window it had been seeking. Not only was it back in the game, but it was in the driver’s seat.
Not long afterward, Charter announced it was going ahead with a $10.4 billion deal for Bright House Networks, a transaction that had been previously agreed to but was contingent on the completion of Comcast’s takeover of Time Warner Cable. Then last week, the European company Altice bought the small American cable operator Suddenlink, with hints that it might pursue a bigger target like Time Warner Cable.
“A surprising entrance from Altice into the U.S. cable industry probably pushed things along,” Ms. Yong said, “and that probably raised urgency for Charter to react faster rather than later.”
Now, if all goes as planned, Charter will acquire Time Warner Cable as well, essentially putting it on the same footing as Comcast, but at a steeper price.
“Ultimately, it paid off,” Ms. Yong said. “But Charter paid a price for waiting.”
A version of this article appears in print on May 26, 2015, on page B1 of the New York edition with the headline: In Cable Deal, Charter Seeks National Heft . Order Reprints|  Today's Paper|Subscribe