Charter Communications said Monday it has offered to buy Time Warner Cable for about $61 billion, a stunning bid that would merge the No. 4 and No. 2 cable companies in America and shake up the troubled cable television industry.
Time Warner Cable's board of directors quickly rejected the offer, calling it "a third grossly inadequate proposal."
Charter's bid of $132.50 a share for the much larger Time Warner Cable represents one of the biggest takeover offers on Wall Street since the financial crisis. It would include $37 billion in cash and stock and the rest in assuming TWC's debt. It also might kick off a bidding war for TWC, with other cable operators such as Comcast Corp. and Cox Communications entering the fray.
"Charter's latest proposal is a non-starter," said TWC's CEO Robert Marcus in a statement Monday. "Not only is the nominal valuation far too low, but because a significant portion of the purchase price would be in Charter stock, the actual value delivered to TWC shareholders could be substantially lower given the valuation, operational, and significant balance sheet risks embedded in Charter's stock."
Marcus said his company is willing to accept a price of $160 per TWC share, consisting of $100 in cash and $60 per share of Charter common stock.
Charter had previously offered cash and stock valued at about $114 a share in June and about $127 in October, TWC noted in its statement. TWC rejected those offers as it continued to weigh other options, including talks with other cable companies.
"Time Warner Cable quickly rejected our proposals in June and October, and refused to engage until we met in December. I communicated a willingness to submit a revised proposal in the low $130s, including a cash component of approximately $83," wrote Charter CEO Tom Rutledge in a letter to Marcus Monday.
Shares of Time Warner Cable rose 0.97% in after-hours trading Monday to $133.69.
With competitors vying to buy TWC, its shares have risen nearly 15% in the last six months. Citing the stock's rise and TWC's reluctance to engage more fully in talks for a merger, Rutledge is revealing his latest offer publicly "to bring the matter to shareholders directly," Charter said.
In his letter, Rutledge also said TWC responded to his offer in December with "a verbal offer at an unrealistic price expectation."
"The financing to complete this transaction is fully negotiated, and we can be in a position to sign commitment letters in a matter of days," Rutledge wrote.
Facing greater competition from online streaming video operators, pay-TV providers are struggling to hold on to subscribers. Content creators are also demanding higher pay for licensing their shows. Executives and analysts have been calling for an industry consolidation to shake out weaker players and give surviving companies greater bargaining power in dealing with content suppliers.