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Charter Jumps Gun on TWC Restructuring

Mari Silbey
4/26/2016
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Although Charter is still waiting on official approval to acquire Time Warner Cable and Bright House Networks, integration plans for both MSOs are already well underway.

According to a document shared by an internal source, "New Charter" sent a communication to Time Warner Cable employees about a month ago detailing plans to shift operations from select TWC and Bright House network centers to existing Charter facilities in St. Louis, Mo. and Austin, Texas. The source reports that regional TWC executives appeared to be "blindsided" by the mass email and had little reassurance to offer existing employees beyond encouraging them to explore potential job opportunities in the new locations.

Affected Network Operations Centers (NOCs) as detailed by the mass email include Time Warner Cable Inc. (NYSE: TWC) facilities in: Charlotte, N.C.; Herndon, Va.; and Syracuse, N.Y. A Bright House Networks NOC in St. Petersburg, Fla. is also among the sites affected. The overall transition is supposed to begin six months after the two Charter acquisitions close and could take as long as 18 months to complete.

Asked about the restructuring plans, a Time Warner Cable spokesperson did not deny any details, but did suggest that communications had been smoother than the recount above implies.

In a statement provided to Light Reading, the spokesperson said: "Over the last several months, we've worked closely together on integration planning and communications. The Charter team is very respectful of TWC employees and we are pleased with the process."

A Charter Communications Inc. spokesperson expressed disbelief that any executives had been blindsided by communications about the planned merger transition, saying that "the management teams of all three companies have been working in lockstep," including the communications departments.


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Corporate mergers inevitably produce friction, and it's not unexpected to see Charter planning to close certain offices to reduce redundant operations. What's interesting to see is how much of the plans to consolidate MSO facilities appear to have been decided and widely communicated internally before regulatory approval was virtually assured.

The US Department of Justice approved the Charter deals with conditions yesterday at the same time that Federal Communications Commission (FCC) Chairman Tom Wheeler announced he is also recommending approval with conditions in place. The full Commission still has to vote on the matter, but with Wheeler's endorsement, approval by the FCC is expected. The final hurdle for Charter is likely to be overcome on May 12 when the California Public Utilities Commission hands down its regulatory decision. As with Chairman Wheeler, a state judge in California has already recommended approval with conditions. (See Wheeler Recommends Charter Deals.)

— Mari Silbey, Senior Editor, Cable/Video, Light Reading

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brooks7
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brooks7,
User Rank: Light Sabre
4/26/2016 | 11:14:45 AM
I wonder if the SEC will have anything to say
 

There are limits to how an acquirer can act before a deal closes.  Integration plans are supposed to be developed, but it could be argued that this doesn't allow TWC to act as an independent company.  People will leave critical positions based on the information and the vote still needs to happen and it can fail.

seven

 
msilbey
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msilbey,
User Rank: Blogger
4/26/2016 | 11:26:40 AM
Re: I wonder if the SEC will have anything to say
brooks7- I wonder this too, though it doesn't appear that Charter is worried about acting ahead of approval. 
mendyk
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mendyk,
User Rank: Light Sabre
4/26/2016 | 11:47:10 AM
Re: I wonder if the SEC will have anything to say
From the outside, this looks poorly handled. I imagine it looks even worse from the inside for TWC employees. Anyone who's been involved on the short end of a corporate merger can empathize. The situation is bleaker when the acquirer is somewhat unsophisticated.
kq4ym
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kq4ym,
User Rank: Light Sabre
5/3/2016 | 10:49:03 AM
Re: I wonder if the SEC will have anything to say
Yes, it is a bit curious that communication among the entities was not handled better. Although, it's not clear that it was as confusing as may have been reported, jumping the gun before the regulators's approval must as been embarassing after it was reported.
brooks7
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brooks7,
User Rank: Light Sabre
4/26/2016 | 1:30:30 PM
Re: I wonder if the SEC will have anything to say
Mari,

The aren't exactly acting and this would be a super gray (or grey) area of the law.  The companies are supposed to act independently before the deal actually closes via the shareholder vote.   Charter hasn't given anyone an order - they have provided information to what will become (if the vote passes) new employees.  

The theoretical problem happens if the vote fails.  A number of people will have quit by the time the deal closes.  That means that it will be difficult for TWC to execute its business and make people more like to vote to merge.

The people at Charter may have considered it a kindness.  A type of early severence.  You know your job is going away and so "head's up go get a new one".  Lots of G&A people will be facing the same challenge.

seven

 
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