Charter-Time Warner deal may unnerve some shareholders

A lot of people here in Massachusetts, as well as across the nation, are talking about the deal that was struck recently by Charter Communications Inc. and Time Warner Cable Inc. The merger between the two companies, who have long lived in the shadow of the powerhouse cable provider Comcast Corp, will strengthen their position within the cable industry, potentially even giving Comcast a run for its money down the road.

But while some shareholders are thrilled by the deal, some are a little more wary of the change. That’s because the acquisition of Time Warner Cable will cause its debt to nearly triple, rising from roughly $23 billion to as much as $65.7 billion. As a number of our Worcester readers will agree, this is a considerable amount of debt that could hurt investors and shareholders alike.

As some of you may know, businesses have a fiduciary duty to their shareholders. Those in leadership must make decisions that are in the best interest of their company as well as their investors. Making deals that could otherwise cause an investor to suffer financial ruin could be considered a breach of the company’s fiduciary duty, leaving the company and its leadership liable in civil litigation.

Although reports do not indicate the potential for litigation at this time, it’s worth pointing out that if the merger turned out to be a detriment to shareholders, then investors could have grounds for litigation and redress for any damages they suffered as a result. As you can imagine though, this would not be an easy issue to resolve without the help of a skilled lawyer, which is something for our readers to keep in mind if they suspect this case could present problems for them.

Source: The Wall Street Journal, “Time Warner Cable Deal Stirs Debt Concerns,” Gillian Tan, May 26, 2015