Cablevision Shareholders’ Vote on Dolans’ Privacy Bid Set for Oct. 24
$36.26-per-Share Offer Represents 7.2% Premium Over Wednesday’s Closing Price
By Jon Hemingway -- Broadcasting & Cable, 9/13/2007 11:32:00 AM
Cablevision Systems said shareholders will get to vote on the takeover bid by company founder and chairman Charles Dolan and his son and company CEO James Oct. 24, although the pair cautioned that they may have to restructure the financing due to the turbulent financial markets.
If the proposal is accepted, shareholders will receive $36.26 per share, a 7.2% premium over Wednesday’s $33.80 closing price. The stock was up $1 or 2.96% through midday Thursday.
The Dolans reiterated that the unsettled state of the capital markets may force them to rethink how they will structure the financing. According to a Securities and Exchange Commission filing Thursday, higher borrowing costs may force the Dolans to consider ways to reduce Cablevision’s post-closing leverage. That may include developing a “strategic relationship” with another company or investor, selling assets or closing businesses that are not making money.
As the deal stands, approximately $15.5 billion in debt will be raised to fund the merger, to refinance debt and to use for working capital post-merger.
The company currently has financing commitments from Merrill Lynch, Bear Stearns and Bank of America. Of that total, $6.225 billion are interim loans that are expected to be refinanced with the issuance of high yield bonds after the closing of the deal. But as investors have fled to higher-quality and “safer” investments this summer, the high-yield market has ground to a halt and made financing efforts difficult.
Shareholder approval in October would bring to a close a year-long process by the family to take the company out of the public eye, including three separate offers over that span. The first offer of $27 per share was initiated in October of last year, followed by a $30 "best and final offer” offer in January that was also rejected. The $36.26-per-share offer represents a 34% increase over the original price floated in October.
While Sanford C. Bernstein analyst Craig Moffett noted that Cablevision’s free-cash-flow projections warrant a higher valuation -- as much as twice the offer price -- he said the deal’s chances of approval have improved.
“As CVC's stock price has declined and as prevailing multiples for the cable sector overall have contracted, the likelihood that shareholders will vote in favor of the Dolan offer has undoubtedly risen, in our view,” Moffett wrote in a research note Thursday.
