shareholders sue to stop time warner comcast merger
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SUPREME OURT OF THE ST TE O F NEW YORK
OUNTY OF NEW YORK
xBREFFNI BARRETT on Behalf of Index No.Himself and A ll Others Similarly Situated
Plaintiff Date Filed: February 14, 2014
v.SUMMONS
TiME WARNER CABLE INC., ROBERTD. MARCUS GLENN A. BRITT N.J.NICHOLAS JR., DON LOGAN DAVID
C. CHANG WAYNE H. PACE PETER R.HAJE CAROLE BLACK THOMAS H.
CASTRO JAMES E. COPELAND JR.,DONNA A. JAMES EDWARD D.
SHIRLEY JOHN E. SUNUNU
COMCAST CORPORATION and
TANGO ACQUISITION SUB, INC.,
Defendants.
xTo the above named defendants:
YOU ARE HEREBY SUMMONED to answer the complaint in this action
a copy of your answer or, if the complaint is not served with this summons to serve
appearance on the plaintiffs attorneys within 20 days after the service of this summexclusive of the day of service or within 30 days after the service is complete if this
not personally delivered to you within the State of New York ; and in case of your f
appear or answer judgment will be taken against you by default for the relief deman
complaint.
Plaintiff designates New York County as the place of trial. The basis of the
defendant Time Warner Cable Inc.’s headquarters and principal place of business at
Columbus Circle, New York, NY 10023.
Dated: New York, New York
February 14, 2014
WOLF HALDENSTEIN ADLER
FREEMAN HERZ LLP
FILED: NEW YORK COUNTY CLERK 02/14/2014NYSCEF DOC. NO. 1 RECEIV
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DEFENDANTS’ ADDRESSES:
ROBBINS ARROYO LLP
BRIAN J ROBBINS
STEPHEN J ODDOEDWARD B GERARD
JUSTIN D RIEGER
600 B Street, Suite 1900San Diego CA 92101Telephone: 619 525 3990
Facsimile: 619 525 3991
Attorneys jör Plaintiff
Time Warner Cable Inc
Principal Executive Offices
60 Columbus CircleNew York, NY 10023
Tango Acquisition Sub Inc
Registered Agent:
The Corporation Trust Company
Corporation Trust Center
1209 Orange St
Wilmington DE 19801
Robert D Marcus
do Time Warner Cable Inc
60 Columbus Circle
New York, NY 10023
Don Logando Time Warner Cable Inc
60 Columbus Circle
New York, NY 10023
Wayne H Pace
Comcast Corporation
Principal Executive Offices
One Comcast CenterPhiladelphia PA 19103 2838
Glenn A Britt
188 E 78th Street, Apt 19B
New York NY 10075-0533
N.J. Nicholas Jr
do Time Warner Cable Inc
60 Columbus Circle
New York, NY 10023
David C Changdo Time Warner Cable Inc
60 Columbus Circle
New York, NY 10023
Peter R Haje
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James E opeland Jr
do Time Warner Cable Inc60 olumbusCircle
New York NY 10023
Edward D Shirley
c/o Time Warner Cable Inc
60 olumbusCircle
New York NY 10023
74 382
Donna A James
c/o Time Warner Cable Inc60 olumbusCircle
New York NY 10023
John E Sununu
do Time Warner Cable Inc
60 Columbus Circle
New York NY 10023
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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
X Index No
BREFFNI BARRETT on Behalf of
Himself and All Others Similarly Situated CLASS ACT•ION
Plaintiff COMPLAINT BASED UPON S
DEALING AND FOR BREACH
v FIDUCIARY DUTY
TIME WARNER CABLE INC ROBERTD MARCUS GLENN A I3RITT N J
NICHOLAS JR DON LOGAN DAVID
C CHANG WAYNE H PACE PETER R
HAJE CAROLE BLACK THOMAS H
CASTRO JAMES E COPELAND JR
DONNA A JAMES EDWARD D
SHIRLEY JOHN E SUNUNU
COMCAST CORPORATION and
TANGO ACQUISITION SUB INC.
Defendants
x
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SUMMARY OF THE ACTION
This is a stockholder class action brought by plaintiff on behalf
common stock of Time Warner Cable Inc. ‘Time Warner or the ‘Company”)
Warner, certain Time Warner officers and directors the “Individual Defendant
Corporation Comcast”), and Tango Acquisition Sub, Inc. “Merger Sub”). This a
enjoin defendants from further breaching their fiduciary duties in their pursuit of
Company at an unfair price through an unfair and self-serving process to C
“Proposed Transaction” .
2. Time Warner is among the largest providers of video, high-speed da
services in the United States. After the completion of the Proposed Transaction
will b ecome a wholly-owned subsidiary of Comcast. Upon closing of the mer
shareholders will own approximately 77 of stock in the combined company
Warner shareholders will own only 23 . Moreover as part of the merger Comcas
Time Warner’s approximately eleven million managed subscribers. This will bri
managed subscriber total to approximately thirty million.
3. The Proposed Transaction is the result of an unfair process and
Company’s shareholders with unfair consideration. Since rumors f irst leaked in mi
several companies interested in acquiring Time Warner, it has been reported th at
failed to engage in good faith negotiations. As a result of what appears to be a woef
sales process, defendants agreed that Time Warner’s shareholders would receive just
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immediately before the deal was announced, Time Warner shareholders are rec
valued at only 158.82 for each share of Time Warner stock they own, a mere 17
4. The inadequacy of the Proposed Consideration is evidenced by th
recent financial performance and future business prospects. Time Warner has beat
earnings pe r share (“EPS”) expectations in eight of the last ten quarters includ
recent quarter. Moreover, the Company expects to continue experiencing substa
On January 30, 2014, Time Warner released its fourth quarter earnings reflecting str
and operating performance fo r 2013. Specifically, the Company reported that full-
grew 3.4 year over year, driven primarily by growth of 21.6 in business services
14.4 in residential high speed data revenue. In announcing these results defenda
Marcus (“Marcus”), Time Warner’s Chairman of the Boa rd of Directors (the “Boar
Executive Officer (“CEO”), commented “I’m really excited about the progress we
fourth quarter] and the sign jficantly better trends we’re driving as we enter 201
executing well and we’ve started the year with meaningful operating momentum.”
5. In addition the Company has consistently grown its business an
market share with additional subscribers and infrastructure. In particular resident
high speed data subscribers more than doubled year over year to 910,000
Moreover during the fourth quarter , Time Warner added 16,000 commercial bu
network, ending the year with connectivity to 860,000 commercial buildings
December 31, 2013, the Company acquired DukeNet Communications LLC (“
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Exchange Commission “SEC”) on February 13, 2014. These provisions which fur
the chances of obtaining maximum value for the Company’s shareholders by
precluding any competing offers fo r the Company, include: i) a no solicitation clau
T im e Warner from seeking a better offer for its shareholders; and ii) a five
matching rights period during which Comcast can match any superior proposal re
Company. These provisions reflect an attempt by the Board to lock up the Proposed
at a price that g ross ly undervalues the Company while simultaneously securing fo
certain personal benefits no t shared equally by Time Warner’s public shareholders
9. Specifically while the Company’s shareholders will lo se con trol of
at an unfair price, the Company’s fiduciaries will receive immediate benefits from t
the Proposed Transaction For instance, T ime Warner’s off icers and directors will
60 million in special payments for currently unvested stock options, performan
restricted shares, all of which sha ll , upon the closing of the Proposed Transaction
vested and exerc isable . Moreover , defendant Marcus and other members of senior
are also entitled to receive millions of dollars in change of control payments Th
none of which are shared equally by T ime Warner’s public shareholders were key
Individual Defendants’ decision to pursue the Proposed Transaction
10. To remedy defendants’ breaches of fiduciary du ty and other miscond
seeks, in te r alia: i) injunctive relief preventing consummation of the P ropo sed
unless and until the Company adopts and implements a procedure or process
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of Time Warner shareholders; and/or iii) rescission of to the extent already impl
Merger Agreement or any of the terms thereof.
JURISDICTION AND VENUE
11. This Court has jurisdiction over each defendant named herein. T
conducts business and maintains operations in New York. It is headquartered i
County at 60 Columbus C ircle. The remaining defendants have sufficient minim
with New York so as to render the exercise of jurisdiction by this Court perm
traditional notions of fair play and substantial justice
12. Venue is proper in this Court because Time Warner is headquar
County and one or more of the defendants either resides in or maintains executive o
County. Additionally a substantial portion of the transactions and wrongs complai
occurred in this County, including the defendants’ primary participation in the w
detailed herein and aiding and abetting in violation of fiduciary duties owed to Ti
shareholders. Defendants have received substantial compensation in this Coun
business here and engaging in numerous activities that had an effect in this County
pursuant to Article of the Merger Agreement “the closing of the Merger the “C
take p lace in New York City at the offices of Davis Polk Wardwell LLP, 45
Avenue, New York, New York, 10017.”
PARTIES
13. Plaintiff Breffni Barrett has been a shareholder at all times relevant
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the largest providers of video, high speed data, and voice se rv ices in the
technologically advanced well clustered cable systems located mainlyin five
geog
New York State, the Carolinas the Midwest, Southern California and Texas. T
serves approximately fifteen million customers who subscribed to one or more of th
three primary services. Upon completion of the Proposed Transaction T ime
become a wholly owned subsidiary of defendant Comcast.
15. Defendant Marcus is Time Warner’s Chairman of the Board and C
been since January 2014 and a director and has been sin ce July 2013. Defendant
also Time Warner’s President and Chief Operating Officer from December 2010 to
and Chief Financial Officer from 2008 to 2011.
16. Defendant Glenn A. Britt “Britt” is a Time Warner director and h
March 2003. Defendant Britt was also Time Warner’s CEO from August 2001
2013 and Chairman of the Board from March 2009 to December 2013 and from Au
March 2006.
17. Defendant N.J. Nicholas Jr. “Nicholas” is a Time Warner’s lead
director and has been since May 2012 and a director and has been since March 2003
18. Defendant Don Logan “Logan” is a Time Warner director and ha
March 2003. Defendant Logan was also Time Warner’s Chairman of the Board fr
2006 to March 2009.
19. Defendant David C, Chang “Chang” is a Time Warner director
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21. Defendant Peter R. Haje “Haje” is a Time Warner director and h
July 2006. I efendant Haje was also Time Warners independent lead director from
to May 2012.
22. Defendant Carole Black “Black’ is a Time Warner director and h
July 2006.
23. Defendant Thomas H. Castro “Castro’ is a Time Warner director
since July 2006.
24. Defendant James E. Copeland, Jr. “Copeland” is a Time Warner dir
been since July 2006.
25. Defendant Donna A. James “James” is a Time Warner director
s ince March 2009.
26. Defendant Edward D. Shirley “Shirley” is a Time Warner director
since March 2009.
27. Defendant John E. Sununu “Sununu” is a Time Warner director
since March 2009.
28. Defendant Comcast is a Pennsylvania corporation with principal exe
located at One Comcast Center, 1701 John F. Kennedy Boulevard, Philadelphia, P
Defendant Comcast is a global media and technology company with two primary
Comcast Cab le and NBCUniversal. Defendant Comcast is the nation’s largest video
Internet, and phone provider to residential customers under the XFINITY bra
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29. Defendant Merger Sub is a Delaware corporation and a wholly own
of defendant Comcast. Upon completion of the Proposed Transaction defendan
will merge with and into Time Warner and cease its separate corporate existence
THE INDIVIDUAL DEFENDANTS’ FIDUCIARY DUTIES
30. Under applicable law, in any situation where the directors of a pu
corporation undertake a transaction that will result in a sale or change in corporate
have an affirmative fiduciary obligation to obtain the highest value reasonably ava
corporation’s shareholders including a significant control premium To diligently
these duties, neither the officers nor the directors may take any action that:
a adversely affects the value provided to the corporation’s share
b will discourage inhibit or deter alternative offers to purcha
the corporation or its assets;
c contractually prohibits themselves from complying with th
duties;
d will otherwise adversely affect their duty to secure the
reasonably available under the circumstances for the corporation’s shareholders; and
e will provide the directors and/or officers with preferential tre
expense o1 or separate from, the public shareholders.
31. In accordance with their duties of loyalty and good faith, th
Defendants as directors, officers, and/or majority shareholders of Time Warner
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b participating in any transaction where the directors or office
are entitled to receive, a personal financial benefit no t equally shared by the public
of the corporation; and or
c unjustly enriching themselves at the expense or to the detr
public shareholders.
32. The Individuals Defendants are well aware of their duties because
them a letter on December 6, 2013, shortly after rumors leaked of several compan
in acquiring Time Warner. These interested parties included, but were no t limite
ommunications Inc. “Charter” , Cox ommunications and Comcast. Pla
discussed the Individual Defendants’ fiduciary duties and demanded that th
Defendants conduct a thorough review of all of Time Warner’s strategic alternatives
potential sale. In his letter, plaintiff specifically explained that the Board must focu
to maximize shareholder value in a potential sale of the Company. As further detaile
Individual Defendants failed to meet their dut ies under applicable law. A true and
of plaintiffs December 6, 2013 letter, is attached hereto as Exhibit A.
33. The Individual Defendants separately and together in connecti
Proposed Transaction are knowingly or recklessly violating their fiduciary duties an
abetting such breaches, including their duties of loyalty , good fa ith , and independe
plaintiff and other public shareholders of Time Warner . Certain of the defendants
for themselves personal benefits, including personal financial benefits not share
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Individual Defendants self-dealing and divided loyalties neither plaintiff nor th
receive adequate or fa ir value for their Time Warner common stock in the Proposed
34. Because the Individual Defendants are knowingly or recklessly br
fiduciary duties of loyalty good fa ith and independence in connection with
Transaction, the burden of proving the inherent or entire fairness of the Proposed
including all aspects of its negotiation, structure price and terms is placed upon de
matter of law.
THE PROPOSED TRANSACTION
35. On February 13 2014 Comcast and Time Warner issued the followin
release announcing that the Company had entered into an agreement wherein T
stockholders will receive 2.875 Comcast common shares for each share of T
common stock they own. News of the deal came just a couple of days after Charter
the pressure on Tim e Warner by nominating a group of thirteen people as candida
Warner’s Board ahead of the Company’s annual meeting. Charter was gearing up
fight due to the Individual Defendants’ resistance to its advances. The press release
the Proposed Transaction stated in pertinent part:
Comcast Corporation Nasdaq: CMC SA) Nasdaq CMCSK) and Time WCable NYSE:TWC) today announced that their Boards of Directors
approved a definitive agreement for Time Warner Cable to merge with ComThe agreement is a friendly, stock-for-stock transaction in which Comcas
acquire 100 percent of Time Warner ble 284.9 million shares outstan
for shares of CMCSA amounting to approximately 45.2 billion in equity v
Each Time Warner Cable share will be exchangedfor 2.875 shares of cM
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‘The combination of Time Warner Cable and Comcast creates an ex
opportunity for ou r company for our customers and fo r our shareholders
Brian L. Roberts Chairman and Chief Executive Officer Comcast Corpor
“In addition to creating a world-class company this is a compelling financi
strategic transaction fo r our shareholders. Also it is ou r intention to expan
buyback program by an additional 10 billion at the close of the transaction
bel ieve there are meaningful operational efficiencies and the adjusted pur
multiple is approximately 6.7x Operating Cash Flow. This transaction w
accretive and will yield many synergies and benefits in the years ahead
Marcus and his team have created a pure-play cable company that combined
Comcast has the foundation for future growth. We are looking forwa
work ing with his team as we bring our companies together to deliver the
innovative products and se rv ic es and a superior customer experience with
highly competitive and dynamic marketplace in which we operate.”
“Comcast and Tim e Warner Cable have been the leaders in all of the indu
most important innovations of the last 25 years and th is merger will accelera
pace of that innovation. Brian Roberts Neil Smit Michae l Angelakis anComcast management team have built an industry-leading platform
innovative products and services and we’re excited to be part of delivering
the possibilities of cable’s superior broadband networks to more Ame
consumers.”
Time Warner Cable owns cable systems located in key geographic a
including New York aty Southern Jalfornia Texas the Carolinas Ohio
Wisconsin. Time Warner Cable will combine its unique products and se
with Comcast’c including StartOver which allows customers to restart
program in progress to the beginning and LookBack which allows custom
watch programs up to three days after they air live all without a DVR.Warner Cab le also h as been a leader in the deployment of community Wi-Fwill combine its more th an 30 000 hotspo ts primarily in Los Angeles andYork City and its in home management system IntelligentHome with Com
offerings.
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this transaction. This will bring Comcast managed subscriber tot
pproxim tely 30 million Following the transaction, Comcast’s share of ma
subscribers will remain below 30 percent of the total number of M
subscribers in the U.S. and ‘ill be essentially equivalent to Comcast C
subscriber share after its completion of both the 2002 AT T Broa
transaction and the 2006 Adelphia transaction.
36. That same day, on February 13, 2014, the Company filed a Curre
Form 8-K with the SEC. wherein it disclosed the Merger Agreement. The announc
Proposed Transaction and filing of the Form 8-K reveal that the Proposed Trans
product of a flawed sales process and, unless the offer price is increased would be c
at an unfair price. The Merger Agreement also reveals that the Individual Defenda
numerous deal protection devices designed to preclude any competing bids for Time
37. Under the Merger Agreement Time Warner is subject to a no-solic
that prohibits the Company from seeking a superior offer for its shareholders.
section 6.03 a of the Merger Agreement states, in pertinent part:
Section 6.03. No Solicitation; Other Ojfrrs. a General Prohibitions. Neith
Company no r any of its Subsidiaries shall, no r sha ll the Company or anySubsidiaries authorize or permit any of its or their officers, directors, emplo
investment bankers, attorneys, accountants, consultants or other agents or ad
‘Representatives to, directly or indirectly, i solicit, initiate or take any
to knowingly facilitate or encourage the submission of any Company Acqui
Proposal, ii enter into or participate in any discussions other than to stat
the Company is no t permitted to have discussions or negotiations with any
Party that is seeking to make, or has made, a Company Acquisition Proposa
furnish any non-public information relating to the Company or anySubsidiaries or afford access to the business, properties, assets, books or re
of the Company or any of its Subsidiaries to, otherwise knowingly cooper
any way with, or knowingly assist, participate in , facilitate or encourag
effort by any Third Party that is seeking to make, or has made, a Com
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Company cquisitionProposal to the Company’s Board of Directors vi ap
any transaction under, or any Person becoming an “interested stockholder” u
Section 203 of Delaware Law or vii enter into any agreement in principle
of intent, term sheet, merger agreement acquisition agreement option agre
or other similar instrument relating to a Company cquisitionProposal
than a confidentiality agreement to the extent contemplated by Section 6.0
provided that so long as the Company and its Representatives have othe
complied with this Section 6.03 none of the foregoing shall prohib
Company and its Representatives from, at any time prior to the Com
Stockholder Approval participating in discussions with any Persons or gro
Persons who has made a Company cquisition
Proposal after thedate o
greementsolely to request the clarification of the terms and conditions th
so as to determine whether the cquisitionProposal is, or could reasonab
expected to lead to, a Superior Proposal and any such actions shall no t
breach of this Section 6.03 a . It is agreed that any violation of the restrictio
the Company se t forth in this Section by any Representative of the Compa
any of its Subsidiaries shall be a breach of this Section by the Company.
38. Furthermore under section 6.03 b of the Merger greemen
unsolicited bidder arrive on the scene , the Company must notify Comcast of the b
Thereafter should the Board determine that the unsolicited offer is superior, Comc
five business days to amend the terms of the Merger greementto make a counter o
needs to be as favorable to the Company’s shareholders as the unsolicited offer. Co
able to match the unsolicited offer because it is granted unfettered access to the uns
in its entirety, eliminating any leverage that the Company has in receiving the unsoli
39. These onerous and preclusive deal protection devices operate in c
discourage competing offers from emerging for the Company, ensuring tha
transaction is consummated so that the Individual Defendants can secure their o
benefits under the Proposed Transaction. ccordingly the Individual Defendants’
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FAILURE TO MAXIMIZE SHAREHOLDER VALUE
40. The Individual Defendants’ fiduciary duties require them to maximiz
value when entering into a change in control transaction such as the Proposed
Here, however the Individual Defendants’ eagerness to enter into an acquisition w
resulted in a sales process that was not designed to obtain the maximum price fo r
shareholders. As a result, the Company’s public stockholdershave been, and will co
denied the fair process and arm’s-length negotiated terms to which they are entitled
their Company. Indeed, the Proposed Consideration does not reflect th e tru e inhe
the Company as known to the Individual Defendants and Comcast at the time
Transaction was announced.
41. The inadequacy of the Proposed Consideration is evidenced by the
recent financial performance and anticipated business prospects. Time Warne
Bioombergs EPS expectations in eight of the last ten quarters, including the m
quarter. Moreover the Company is continuing to experience substantial growth.
30. 2014, Time Warner released its fourth quarter earnings reflecting strong fin
operating performance for 2013. Specifically the Company reported that full-ye
grew 3.4 year-over-year driven primarily by growth of 2 1.6 in business servic
and 14.4 in residential high speed data revenue. Further, the Company’s fourth q
average monthly revenue per residential customer relationship (“ARPU”) grew
106.03, which is the highest rate of growth since the first quarter of 2012.
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speed data subscribers more than doubled year over year to 910,000 subscribers
during the fourth quarte r, Time Warner added 16,000 commercial buildings to
ending the year with connectivity to 860,000 commercial buildings. Further, on D
2013, the Company acquired DukeNet—a regional fiber optic network company prim
the Carolinas—for 5 72 million in cash including the repayment of deb t) , net of c
and capital leasesa ssumed . Wi th the acquisition of DukeNe t, T ime Warner ende
14,000 cell towers installed on its network.
43. The future looks even brighter for th e Company. As defendant Ma
Warner’s Chairman and CEO, shared in the January 20, 2014 press release: “I’m re
about the progress we made iii fthe fourth quarterJ and the signcantly better tr
driving as we enter 2014 We are executing well and we’ve started the
meaningful operating momentum ”
44. This combination of its record achievements stellar financial resul ts ,
growth prospects has T ime Warner well positioned to achieve and sustain success in
In light of these factors, the Proposed Consideration for which the Board has ag
Time Warner, and divest the Company’s common shareholders of the majority of th
in the business is grossly inadequate. Accordingly it comes as no surprise that th
Consideration falls well below the targe t prices maintained fo r the Company’s stock
two equity research analysts, including those working at Northland Securities Inc.
LLC. Notably analysts at Northland Securities Inc. had maintained a 165 target p
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45 . Unfortunately Time Warners shareholders will now have to share th
expected future success with Corncast in exchange for a premium of only 17.4
Warner’s closing stock price on February 12, 2014 (the day before news of th e dea l
the market). When compared to similar transactions, the Proposed Considerati
Warner is woefully inadequate. O ver the past five years, th ere have been seven
cable and satelliteindustry worth between 1 billion and 100 billion. The median
the target company’s previous day stock price for these deals is 22.35 , nearlyfive
that the premium in the Proposed Transaction. The Proposed Consideration’s pre
drastically below comparable deals when compared to the company’s average sto
the month prior to the announcement of the Proposed Consideration. Using th
average stock price over the previous month, the premium is only 16.8 . This
average premium in comparable deals of 21.09 and median premium of 21.02
company’s prior month average stock price.
46. Moreover, the Proposed Consideration is particularly inadequate wh
to the value of other similarly-sized companies in the same market. The Company
is other large capitalization cable and satellite companies including DIRECTV, D
Corp., CBS Corporation, Viacom, Inc., Charter, and Liberty Global plc. A com
value a public company is by deriving the Enterprise Value (“EV”) to last tw
(“LTM”) earnings before interest, taxes, depreciation and amortization (“EBITDA”
its peer group and then applying tha t range to the target company’s respective financ
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l2.03x LTM EBITDA. Using these multiples, the Company has an EV range of
96 billion. These EV s correlate to a per share value range of 204.84 to 248.70
minimum, 46.08or 29 more than the Proposed Consideration.
47. A public omp ny n lso be valued by deriving the EV to foreca
The Company’s peers have a trading range of between 8.92x and 10.42x forecas
based ontheir forecasted EBITDA for f iscal year 2014. Using these multiples, the C
an EV range of 74.3 billion to 86.8 billion. These EVs correlate to a per share v
172.79 to 216.63. l’his is, at minimum, 13.97 or 8.8 more than t
Consideration. Similarly, the Company’s peers have a trading range of between 8.2
forecasted EBITDA based on their forecasted EBITDA for fiscal year 2015.
multiples, the Company has an EV range of 71 .2 billion to 84.4 billion. These E
to a per share value range of l61.88 to 208.16. This is as much as 49.34or 31.1
the Proposed Consideration.
48 . The Proposed Consideration also fails to adequately compensate Ti
shareholders for the significant annual synergies of 1.5 billion that Comcast will
completion of the Proposed Transaction. As stated in the press release anno
Proposed Transaction:
The transaction will generate approximately 1.5 billion in opeefficiencies and w ill be accretive to Comcas t’ s f ree cash flow per share
preserving balance sheet strength. The merger will also be tax free to
Warner Cable shareholders.
* * *
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believe there are meaningful operational efficiencies and the adjusted pur
multiple is approximately 6.7x Operating Cash Flow. This transaction w
accretive and will yield many synergies and benefits in the years ahead
Marcus and h is team have created a pure-play cable company that, combined
Corncast, has the foundation for future growth. We are looking forwa
working with his team as we bring our companies together to deliver the
innovative products and services and a superior customer experience with
highly competitive and dynamic marketplace in which we operate.”
49. In a merger call following the press release Brian L. Roberts
Comcast’s Chairman and CEO, further touted the “substantial operating syn
combining with Time Warner. Specifically, Roberts stated:
At the same time we see substantial operating synergies as we bring our sc
a combination with Time Warner Cable. We believe that including ope
efficiencies which we estimate conservatively we hope, at 1 .5 billion w
paying approximately 6.7 times EBITDA for premier markets ina cable bu
which we are very bullish on. We bel ieve this merger will be accretive t
cash flow per share within the first year when you exclude transaction r
expenditures.
50. Not only did the Individual Defendants fail to maximize shareho
connection with the Proposed Transaction bu t they did no t protect against potential
Comcast’s stock price tha t would further drive down the implied per share value b
for an exchange ratio collar. As a result, Time Warner shareholders are not ass
receive the Proposed Consideration price of 158.82. Indeed, following the announ
Proposed Transaction Comcast’s stock price declined from a close of 55.24 on
2014 to a close of 52.97 pe r share on February 13, 2014. Thus, at the close of t
February 13, 2014, the consideration being offered to shareholders has an implied
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Company. In exchange Time Warner stakeholders will own only 23 of the
company. The Proposed Transaction will leave the Company’s shareholders with
piece of the combined company than Comcast’s stakeholders but will no t ap
compensate Time Warner shareholders with a proper change in control premium
THE INDIVIDUAL DEFENDANTS WILL REAP DISPROPORTIONATE B
FROM THE PROPOSED TRANSACTION
52. Because the Individual Defendants dominate and control the
corporate affairs of Time Warner and have access to material non public informatio
Time Warner’s financial condition and business prospects there exists an im
disparity of knowledge and economic power between them and the public sharehol
Warner. Therefore it is inherently unfair for the Individual Defendants to execut
any merger or acquisition under which they will reap disproportionate benefits to
of obtaining the best shareholder value reasonably available.
53. Here however defendants have disloyally placed their own intere
tailored the terms of the Proposed Transaction so as to aggrandize their ow
Accordingly the Proposed Transaction will improperly benefit the defendants at th
Time Warner’s public shareholders’ rights to receive the best consideration reasona
for their Company shares.
54. The Individual Defendants were motivated to engage in this tra
reasons that are no t equally shared by other shareholders such as plaintiff. For exa
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55. The Individual Defendants were further motivated to engage in this t
the accelerated vesting of th eir equity awards guaranteed in the Proposed
Defendants Black Castro Chang Copeland Haje James Logan Nicholas Pace
Sununu have just under 30 million worth of unvested equity awards that will
connection with the Proposed Transaction. Similarly defendant Marcus has over 3
unvested equity awards that will accelerate in connection with the Proposed Transac
56. These benefits none of which are shared equally by Time Wa
shareholders were key factors in the Individual Defendants’ decision to pursue
Transaction.
57. As a result of defendants’ conduct Time Warner’s public stockholde
and will continue to be denied the fair process and arm’s-length negotiated terms t
are entitled in a sale of thei r Company. The consideration reflected in the Merge
does no t reflect the true inherent value of the Company that was known only to t
efendants as directors of Time Warner and defendant Comcast at the tim e
Transaction was announced.
58. In light of the foregoing the Individual Defendants must as th
obligations require:
• Withdraw their consent to the merger of Time Warner with defend
and allow the shares to trade freely without impediments
aforementioned no-solicitation matching rights and termination fee
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• Adequately ensure that no conflicts of interest exist between their
and their fiduciary obligation to maximize stockholder value or. if s
exist, to ensure that all conflicts be resolved in the best interests of T
public stockholders; and
• Solicit competing bids to defendant Corncast’s offer without the
discussed above to ensure that the Company’s shareholders are
maximum value for their shares.
THE PROPOSED TRANSACTION FACES HIGH REGULATORY BAR
59. Given Comcast’s dominance in the cable industry, Time Warner’s
Comcast raises antitrust issues that another potential acquirer, like Charter fo r exam
have faced. Comcast not only serves more pay TV customers than any other co
U.S.. nearly twenty two million video subscribers bu t it also owns the entertainm
NBCUniversal parent of the NBC broadcast network and several big cable chann
Universal film studio. The Proposed Transaction has the potential to add another e
video subscribers to Comcast.
60. Any bid for Time Warner Cable would have to be approved by bot
Communications Commission and the U.S. Department of Justice, which have
bringing antitrust enforcement actions against would be mergers that they belie
competition. Indeed, regulatory issues have prevented other megadeals—such as A
39 billion bid for T-Mobile—from getting approved in recent years.
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Tony Wible, Janney Capital Markets: “A deal may face a fie
Washington as )‘ou are merging the two largest cable operators. Co
to already acknowledge this and will look to divest subs. Clearly th
argument to he made that a deal: 1) helps consumers by keeping prog
in check, 2) does not change the competitive environment given tha
notcompete today, and 3) is needed given the video landsc
competitive today. However, the government could still object and
concerned about one company controlling so much of the ountr
infrastructure, We believe it is too early to model out the deal given
uncertainty.”
Adam flkowitz, Nomura Securities: “Market share is not the
network size and vertical integration. We don think the regulators
will quibble wit/i 29 video market share, bitt we think the pro for
covering an estimated 66 of homes passed could present a probl
wit ? the vertical integration wit/i NBCU, there may become
concessions around carriage of competing channels. We
NBCU/CMCSA consent decree is being challenged by Bloomberg,
need to be solved as well.”
CLASS ACTION ALLEGATIONS
62. Plaintiff brings this action on his own behalf , and as a class action, on
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63. This action is properly maintainable as a class action pursuant to CPL
64. The Class is so numerous that joinder of all members is impracticable
to the Merger Agreement as of February 10, 2014, Time Warner had more than
shares of common stock issued and outstanding held by hundreds if no t t
individuals and entities throughout the country. The number and identities of the r
of Time Warner’s securities can be easily determined from the stock transfer journa
by Time Warner o r its agents.
65. There is a well defined community of interest in the questions of
involved affecting the members of the Class , including, inter alia, the following
a whether the Individual Defendants have breached their fidu
secure and obtain the best value reasonable under the circumstances for the benef
and the other members of the Class in connection with the Proposed Transaction;
b whether defendants have breached any of their other fiduci
plaintiff and the other members of the C lass in connection with the Proposed
including the duties of loyalty, candor, and due care ;
c whether plaintiff and the other members of the Class would b
harmed were the transactions complained of herein consummated;
d whether the members of the Class have sustained damages, an
is the proper measure of damages; and
e whether defendant Comcast or its a ff ilia te s have a ided and
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claims are typical of the claims of the other members of the Class Plaintiff d
interests antagonistic to or in conflict with those he seeks to represent Plaintiff is
adequate representative of the Class
67 The likelihood of individual Class members prosecuting separa
actions is remote due to the relatively small loss suffered by each Class member as
the burden and expense of prosecuting litigation of this nature and magnitude A
action defendants are likely to avoid liability for their wrongdoing and Class
unlikely to obtain redress for their wrongs alleged herein There are no difficultie
encountered in the management of the Class claims This ourt is an appropriate f
dispute
68 The prosecution of separate actions by individual members of the
create the risk of inconsistent or varying adjudications with respect to individual me
Class which would establish incompatible standards of conduct for defendants or
with respect to individual members of the Class which would as a practica
dispositive of the interests of the other members no t parties to the adjudications or
impair or impede their ability to protect their interests
69 efendants have acted on grounds generally applicable to the Class
to the matters complained of herein thereby making appropriate the relief sough
respect to the Class as a whole
FIRST CAUSE OF ACTION
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71. The individual efendantshave viola ted the fiduciary duties of ca
and independence owed to the public shareholders of Time Warner and have acted
personal interests ahead of the interests of Time Warner shareholders
72. By the acts, transactions and course of conduct alleged herein,
individually and acting as a part of a common plan, are attempting to unfairly depri
and other members of the Class of the true value inherent in and a rising f rom Time W
73. The Individual efendantshave violated their fiduciary duties by en
Warner into the Proposed Transaction without regard to the effect of the Proposed
on Time Warner shareholders
74. As demonstrated by the allegations above, the Individual Defendan
exercise the ca re required and breached their duties of loyalty and independence o
shareholders of Time Warner because among other reasons:
a they failed to take s teps to maximize the value of T ime W
public shareholders;
b they failed to properly value Time Warner and its various
operations; and
c they ignored or did no t protect against the numerous conflicts
resulting from the directors’ ow n interrelationships or connection with the
Transaction
75. Because the Individual efendantsdominate and contro l th e bu
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shareholders of Time W arner w hich m akes it inherently unfair for them to
recommend any proposed transaction wherein th ey w ill reap disproportionate ben
exclusion of maximizing shareholder value.
76. By reason of the foregoing acts practices and course of conduct the
Defendants have failed to exercise ordinary care and diligence in the exercise of the
obligations toward plaintiff and the other members of the Class .
77 The Individual Defendants are engaging in self dealing are no t acti
faith toward plaintiff and the other members of the Class and have breached and ar
their fiduciary duties to the members of the Class.
78. As a result of the Individual Defendants’unlawful actions plaint
other members of the Cla ss will be irreparably harmed in that they will no t receiv
portion of the value of Time Warner’s assets and operations. Unless the Proposed
is enjoined by the Court the Individual efendantswill continue to breach the
duties owed to plaintiff and the members of the Class will not engage in a
negotiations on the Proposed Transaction terms and may consummate the
Transaction all to the irreparable harm of the members of the Class.
79. Plaintiff and the members of the Class have no adequate remedy a
through the exercise of this Court’s equitable powers can plaintiff and the C
protected from the immediate and irreparable injury which defendants’ actions threa
SECOND CAUSE OF ACTION
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81 The Individual Defendants owed to pl inti and the members o
certain fiduciary duties as fully set out herein
82 By committing the acts alleged herein the Individual Defendants bre
fiduciary duties owed to pl inti and the members of the Class
83 Defendant Time Warner colluded in or aided and abetted the
Defendants’ breaches of fiduciary duties and was an active and knowing partici
Individual Defendants’ breaches of fiduciary duties owed to plaintiff and the mem
Class
84 Plaintiff and the members of the Class shall be irreparably injured
and proximate result of the aforementioned acts
THIRD CAUSE OF ACTION
Claim Against Defendants Comcast and Merger Sub
for Aiding and Abetting Breach of Fiduciary Duties
85 Plaintiff incorporates by reference and realleges each and eve
contained above as though fully set forth herein
86 The Individual Defendants owed to pl inti and the members of the
fiduciary duties as fully se t out herein
87 By committing the acts alleged herein the Individual Defendants b
fiduciary duties owed to plaintiff and the members of the Class
88 Comcast and Merger Sub colluded in or aided and abetted th
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Sub obtained and will obtain both direct and indirect benefits from colluding in
abetting the Individual Defendant’s breaches Comcast and Merger Sub will ben
acquisition of the Company at an inadequate and unfair consideration if t
Transaction is consummated
90 Plaintiff and the members of the Class shall be irreparably injured a
proximate result of the aforementioned acts
PRAYER FOR RELIEF
WHEREFORE plaintiff demands relief in his favor and in favor of the Clas
defendants as follows:
ADeclaring
that this actionis properly maintainable as a class action;
B Declaring and decreeing that the Merger Agreement was entered into
the fiduciary duties of defendants and is therefore unlawful and unenforceable
C Enjoining defendants their agents counsel employees and all pers
concert with them from consummating the Proposed Transaction unless and until
adopts and implements a procedure or process reasonably designed to enter in
agreement providing the best possible value for shareholders
D Directing the Individual Defendants to exercise their fiduciar
commence a sale process that is reasonably designed to secure the best possible con
Time Warner and obtain a transaction which is in the bes t interests of Time Warner
E Rescinding to the extent already implemented the Merger Agreemen
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reasonable attorneys and experts fees; and
H. Granting such other and further equitable relief as this Court may d
proper.
Date: February/4 2014 WOLF HALDENSTEIN ADLER
FR HERZ LLP
BY :\
GREGORYM/1’JESPOL
BEJAMIN Y. KAUFM
270 Madison Avenue
New York, NY 10016
Telephone: 212) 545-4600Facsimile: 212 545 4653
ROBBINS ARROYO LLP
BRIAN J. ROBBINSSTEPHEN J. ODDO
EDWARD B. GERARD
JUSTIN D. RIEGER
600 B Street, Suite 1900
San Diego CA 92101Telephone: 619 525 3990
Facsimile: 619 525-3991
Attorneys for Plaintiff
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Exhibit A
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Y ROBBINS
RROYO P
VIA OVERNIGHT ELIVERY
Board ofDirectors
c/o Secretary
TIME WARNER CABLE INC.
60 Columbus CircleNew York, Y 10023
December 6, 2013
Re: Duties of Fiduciaries of Time Warner Cable Inc Pertaining to Acq
Dear Board ofDirectors:
We represent Breffni Barrett, a Time Warner Cable Inc . ( Time Warn
Company ) shareholder. We are writing to you in response to recent repOlis companies are interested in acquiring Time Warner. These interested parties include
limited to, Charter Communications Inc. ( Charter ), Comcast Corp., and Cox Comm
As you are likely aware, Charter has been the most vocal about its efforts to
Time Warner. According to numerous sources, Charter is close to an agreement with
arrange $25 billion of debt financing for a Time Warner bid. However, despite Char
efforts to secure financing and engage Time Warner's management in negotiations, th
has reportedly refused to engage in discussions with Charter.
Our client reminds the Board of Directors (the Board ) of its fiduciary duty t
thorough review of ll Time Warner's strategic alternatives, including a potential sale
review of strategic alternatives, the Board must focus on its duty to maximize shareh
in any potential sale of the Company. In particular, the Board must abide by th
obligations :
(i) the obligation to closely review any transaction where a particulaloyalties are divided, or where a particular director would receive or be
receive a personal financial benefit not equally shared by the public sof Time Warner;
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