(Reuters) – Charter Communications Inc has hired proxy solicitor Innisfree M&A as it gears up for a potential proxy fight at takeover target Time Warner Cable Inc, according to people familiar with the matter.
Charter is looking to nominate a new slate of directors to replace Time Warner Cable’s board after the larger rival rejected its $37.3 billion unsolicited takeover bid.
The one-month window to nominate a new slate expires in mid-February for the annual shareholder meeting in May.
Charter and its largest investor Liberty Media Corp are searching for candidates, the people said on Friday, asking not to be named because they were not authorized to speak with the media.
Representatives for Charter, Liberty Media and Time Warner Cable declined to comment on Friday. Innisfree could not be immediately reached for comment.
While bankers and lawyers put together mergers, proxy solicitors help companies or major investors persuade shareholders to accept or reject those deals. They are responsible for identifying companies’ shareholders and devising messages to help sway their votes.
Their role is most important in situations like proxy fights, where shareholders are to vote on competing slates of board nominees.
Charter is wrapping up a two-week road show, holding meetings with Time Warner Cable shareholders all over the country. On Thursday, T. Rowe Price, a large investor in both Time Warner Cable and Charter, sent a letter to Time Warner Cable urging the two companies to talk.
During these meetings, shareholders have expressed interest in a deal in the mid-$140s per share range, people familiar with the matter said. Charter’s offer on January 13 was $132.50 in cash and stock.
Time Warner Cable’s executives and board insist that the bid is too low and are seeking a deal at $160 or higher. Time Warner Cable shares have been trading above Charter’s offer price, closing at $133.70 on Friday.
Time Warner Cable’s reluctance leaves Charter with the option of raising its bid to get a deal done on a friendly basis, or launching a proxy fight to force a deal through, analysts said.
UBS analyst John Hodulik said Time Warner Cable may face shareholder pressure if Charter raises its bid, even at a price below $160.
“We believe Time Warner Cable is in danger of losing a proxy fight were it to hold fast to the $160 number in the face of a bid from Charter in the $140s,” Hodulik said in a research note on Friday.
He expects that in a proxy fight, Charter could put forward a slate of new directors to replace the board of Time Warner Cable, which has 13 members including Chief Executive Rob Marcus.
Innisfree is one of the top advisers on shareholder votes in hostile situations. It advised Airgas Inc to fend off a hostile takeover from Air Products & Chemicals Inc in 2010 and 2011, a situation that mirrors Time Warner Cable’s current tactics.. Time Warner Cable is working with proxy solicitor MacKenzie Partners Inc.
(Reporting by Soyoung Kim and Liana B. Baker- Editing by Bernard Orr)
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