That’s one of the nuggets that connoisseurs of corporate deals will find interesting in the proxy that Comcast and Time Warner Cable filed with the SEC this morning. Among other things, the document gives the public a first look — albeit a bloodless one — at the behind-the-scenes dramas that led to the $45.2B agreement. The proxy says that Charter Communications and its largest shareholder, Liberty Media, began to talk to TWC about their interest in acquiring the No. 2 cable operator on May 22, 2013. TWC execs considered it too risky and began to talk to Comcast about an alternative arrangement in “mid-2013” with legal reps meeting on June 27. On October 15 Comcast CEO Brian Roberts “indicated that Comcast might be interested in exploring a merger of Comcast and TWC” but also said that he had discussed the possibility of helping Charter. Conversations went back and forth until a series of secret meetings on January 7 at International CES in Las Vegas: Charter CEO Tom Rutledge told Marcus that he was about to go public with his offer. Shortly afterward Marcus met with Roberts to bring him up to date. Later in the week Roberts said his conversations with Charter had “intensified.” Comcast management told its board, on January 12, that it preferred a collaboration with Charter. But Charter and Comcast couldn’t agree on terms, and broke off their talks on February 4.
Later that day, Roberts called Marcus and “expressed interest in re-engaging in discussions regarding a potential merger” as long as it “included specific and objectively measurable undertakings with respect to regulatory matters and that did not require Comcast to pay a ‘reverse termination fee'” to TWC if government officials rejected the plan. Roberts didn’t name a price, but said that it would be “significantly higher” than the $132.50 per share value of Charter’s offer. The next day Liberty Chairman John Malone called a long-time colleague, former Time Warner CEO Nick Nicholas — now on the TWC board — to see if the companies could find a “more collaborative path toward combining TWC and Charter.” Nicholas said that his board was firm about its desire to see a higher bid. Meanwhile Marcus and Roberts kept the phone lines humming, with the TWC chief saying that he wanted Comcast to agree to an “exclusivity arrangement.” He also lobbied for a “reverse termination fee” that would pay TWC if the deal collapsed — a proposal that Roberts still rejected. The following day TWC said it wanted $160 a share, and Comcast countered with $150 in stock. On February 10 they agreed on stock exchange terms that enabled TWC to value the deal at $160 a share.
The dickering continued. TWC agreed that, if someone else offered more than Comcast, then it would still let TWC shareholders vote on the Comcast bid. If Comcast didn’t prevail, then TWC wouldn’t have to pay it a termination fee. They agreed to let TWC implement its three-year operating plan and make “retention arrangements” for employees. Execs also discussed “certain programming arrangements” between TWC and Comcast’s NBCUniversal. Bankers and lawyers poured over the terms and the companies finally struck their deal on February 12, to be announced the following day. The terms changed a little afterword: The part involving NBCU programming was amended on March 12, although the document doesn’t say how.