Charter's Time Warner Cable bid puts Rutledge in dealmaker role

Bloomberg NewsJanuary 20, 2014 

RUTLEDGE16

Tom Rutledge says of his merger target: "Time Warner Cable is a great asset."

ANDREW HARRER — Bloomberg

For Tom Rutledge, the man orchestrating a $61 billion takeover battle for Time Warner Cable, the role of dealmaker came late in his career.

In his almost four decades in the cable business, Rutledge has been seen as an operational expert, someone who could manage millions of customers while hammering out agreements with TV networks. In late 2011, when he joined Charter Communications, Rutledge set his sights higher. It was then that he hatched a plan to use a series of deals to transform Charter, the fourth-largest cable provider, into something much bigger.

While billionaire cable veteran John Malone is seen as the top proponent of industrywide mergers, Rutledge has been quietly plotting a takeover strategy for more than two years, according to two people familiar with the matter. After teaming up with Malone, Rutledge completed a $1.63 billion purchase of Cablevision Systems' Optimum West division last July. The "second step" is a Time Warner Cable deal, Rutledge said.

"Time Warner Cable is a great asset," Rutledge, Charter's president and chief executive officer, said in an interview last week. "Obviously there are other opportunities out there."

The 60-year-old executive was thrust into the spotlight last week during public sparring between his company and Time Warner Cable, which has rejected Charter's bid. After Time Warner Cable CEO Rob Marcus called the $132.50-a-share price "a lowball offer," Charter fired back that the takeover target's management was ruining the company with a "failed operational strategy."

Rutledge is now taking his case directly to shareholders. Pushing through a deal would mean acquiring a much larger company: Time Warner Cable is the second-biggest U.S. cable provider, with more than twice as many subscribers. And investors are seeking an offer of $140 to $150 a share, according to surveys compiled by Bloomberg.

"We are not going to let Charter steal the company," Time Warner Cable said in a statement this week.

Rutledge's merger strategy got a jump-start last year, when Malone's holding company Liberty Media Corp. agreed to acquire 27 percent of Charter for about $2.6 billion. Malone called Rutledge out of the blue to suggest the idea, according to people with knowledge of the situation.

Since then, Malone has become the highest-profile advocate for cable deals, referring to Charter as a potential "acquisition machine." Still, Rutledge was a driving force in pursuing Time Warner Cable, one of the people said.

While Rutledge publicly stresses that Charter doesn't need to buy other operators to grow, Time Warner Cable is very attractive, he said.

"This acquisition is an opportunity for us to create enormous value for shareholders," Rutledge said.

Rutledge has spent almost his entire adult life in the cable business. He got his start at a local cable operator — American Television & Communications, which was later acquired by Time Warner Cable — after getting an economics degree at California University in Pennsylvania. Rutledge went on to work for several of the industry's biggest providers, including the company he's now trying to acquire.

As chief operating officer of Cablevision, a company he joined in 2002, Rutledge devised a plan to reduce prices for consumers who bought a bundle of services. This idea of packaging video, Internet and phone into a so-called triple play is now an industry standard.

Less well known is the role he played in helping Cablevision acquire Bresnan Communications Co. for $1.37 billion in 2010. He convinced Cablevision that buying Bresnan would be an efficient way to add subscribers, as well as giving it more leverage when negotiating with TV programmers over licensing fees.

Bresnan was eventually renamed Optimum West, which Rutledge then acquired again in last year's transaction — this time for Charter.

"While I don't think of Tom as a deals guy — just because he hasn't routinely done transactions throughout his career — he's definitely gotten the better part of the ones he's done," Craig Moffett, an analyst at MoffettNathanson LLC in New York, said.

Rutledge also has a clear command of the industry's direction, Moffett said.

"I'm always struck by how enormously insightful an economist he is when he thinks about the business," he said.

Rutledge spearheaded the cable business's push toward adding Wi-Fi hot spots in major cities and updated Cablevision's hardware and software, allowing the company to roll out new products at a faster pace than peers, according to Shahid Khan, chairman of MediaMorph Inc., a software company that caters to the media industry.

Since joining Charter, Rutledge has introduced a digital version of its cable service, aiming to catch up to rivals. He also has narrowed losses at the formerly bankrupt cable provider and added broadband subscribers.

Occasionally, Rutledge's vision puts him at odds with other executives. He abruptly left Cablevision in 2011 amid disagreements over the direction of the company, according to people with knowledge of the matter. Cablevision was a shrinking family-run business, and Rutledge wanted to be somewhere that was expanding, the people said.

Rutledge parted ways with Time Warner Cable in 2001 after he was passed over for CEO, a job that went to Glenn Britt. Marcus, 48, took the helm at the beginning of this year following Britt's retirement.

If Charter is successful with its takeover attempt, Rutledge would reportedly run the combined company. That would put him in the job he sought more than a decade ago.

"There's no question Tom is the guy investors would love to see returning to Time Warner Cable and managing it with a new level of intensity," Moffett said. "I don't think that should be taken in any way as a knock on Rob Marcus. It should be taken as an acknowledgment of the extraordinary success that Tom has had throughout his career."

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