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Time Warner Cable’s next CEO: Ready to sell at right price

By Alex Sherman
Bloomberg News

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Rob Marcus has a message for Time Warner Cable Inc. shareholders: I’m the right guy to decide whether to sell the company.

The 48-year-old chief operating officer is replacing Glenn Britt as Time Warner Cable’s chief executive officer on Jan. 1, amid intense speculation that the company will be acquired.

Time Warner Cable’s Akron-based unit covers customers in Northeast Ohio and Western Pennsylvania and employs about 2,000. It is the overall company’s third-largest division.

Marcus’ background as Time Warner Inc.’s head of mergers from 2003 to 2005 — and his later years as chief financial officer of the cable business — have given him the experience to know a good deal when he sees it, he said in an interview Thursday.

Marcus is taking the reins at a “weird” time, he said.

Charter Communications Inc., a cable operator about one-third the size of Time Warner Cable in market valuation, is putting together a bid to acquire the company, according to people familiar with the matter.

Meanwhile, there has been speculation that the nation’s largest cable company, Comcast Corp. of Philadelphia, and Cox Communications Inc. also have considered making takeover offers.

“I am the perfect guy to manage the M&A [mergers and acquisitions] component out there,” Marcus said at the company’s headquarters in New York’s Time Warner Center. “As much as I’d like to be modest, I am kind of built to manage situations like this.”

Charter is backed by billionaire and cable-industry veteran John Malone.

The company is said to be raising about $25 billion in debt financing as part of a potential bid.

Charter is also reportedly considering a joint deal with Comcast to acquire Time Warner Cable together and split up its assets.

Time Warner Cable, the second-largest U.S. cable provider, would probably accept a bid of $150 to $160 a share, according to a person familiar with the matter, who asked not to be named because the deliberations are private. That would value the company at as much as $45 billion, about 21 percent above its current market capitalization — a figure that has already soared this year because of the takeover speculation. Market capitalization is calculated based on share price multiplied by the number of outstanding shares.

Marcus declined to comment on potential bid prices.

Alex Dudley, a spokesman for Stamford, Conn.-based Charter, declined to comment on a potential Charter offer.

Time Warner Cable has hired proxy solicitor MacKenzie Partners Inc. in case Charter attempts a hostile takeover. MacKenzie, which specializes in mergers and acquisitions, helps companies with unsolicited tender offers and proxy fights — where shareholders attempt to gain control over management.

Marcus isn’t averse to selling the company, even though he’s worked his way up the ranks at Time Warner Inc. and then its Time Warner Cable spinoff since 1998. If a deal will make more money for shareholders than him running the business, he will pull the trigger, Marcus said.

“I am interested only in the value creation and not in entrenchment or my role here,” he said.

If a transaction leads to him not being CEO, “If I want another job, I’m going to get one. I have no doubt. And it’s going to be a good one.”

Marcus also stands to receive more than $50 million in an exit package if the company is sold, according to company filings.

Malone, the founder and chairman of Liberty Media Corp., has publicly advocated for U.S. cable industry consolidation since taking a 27 percent stake in Charter earlier this year. Time Warner Cable has been his primary focus as a takeover target.

While Comcast and Cox, the third-largest cable operator, are both managed by descendants of their founding families, Time Warner Cable has fewer impediments to a sale.

The company was spun off from media giant Time Warner in 2009. It does not have a dual-class stock structure, which can be a tool used by owners to block hostile deals. Its largest investor is San Francisco-based Dodge & Cox, a mutual fund firm with 5.8 percent of shares outstanding.

That makes a deal more feasible for Charter, either as a friendly acquisition or a hostile takeover. If the transaction comes together, Charter CEO Tom Rutledge would run the new company, according to people familiar with the deal structure.

Rutledge, 60, began his career at American Television & Communications, which became Time Warner Cable. In 2002, he joined Cablevision Systems Corp., where he served as chief operating officer. Rutledge then took the Charter CEO job in February 2012.

Cable CEOs, Marcus said, are a close-knit group, partly because they rarely compete with one another. The country’s regions are divided up among the various providers, so they don’t frequently fight head-to-head for customers.

“The cable industry is more collegial than most,” Marcus said. “But we’re all pros, and it’s business.”

Marcus has indicated that he would rather work with Comcast CEO Brian Roberts than Malone, according to a person familiar with his thinking. Malone hasn’t been active in the U.S. cable industry since the late 1990s, when he sold Tele-Communications Inc. to AT&T, making him more of an outsider.

If a takeover doesn’t happen, Marcus plans to increase shareholder value by improving the company’s TV features, broadband Internet and phone service — core products of the so-called “triple-play bundle.” While he hasn’t given a financial outlook for 2014, Marcus said he plans to increase capital spending and hiring to boost Internet speeds, deliver more advanced set-top boxes with better user interfaces and improve customer service.

As part of its technology upgrades, Time Warner Cable will give full TV and video-on-demand streaming capability to devices other than its company-issued set-top boxes, such as equipment made by Roku or Samsung. Currently, streaming services aren’t harmonized among all devices.

Critics of Marcus point to Time Warner Cable’s lackluster operational results since he became COO in December 2010. The company lost 304,000 video customers last quarter, a worse performance than rivals.


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