Cablevision Systems said it agreed to be acquired by Altice, a French company run by Patrick Drahi, for $34.90 a share or $10 billion.
Altice will also assume about $7 billion of Cablevision debt.
The acquisition would continue the reshaping of the cable industry, in which Charter Communications is in the process of acquiring the No. 2 MSO Time Warner Cable and Bright House Communications.
Drahi, an investor, has been buying up communications companies around the world. He moved into the U.S. by agreeing to acquire Suddenlink Communications in May for $9 billion.
Cablevision serves more than 3 million subscribers in the New York area, but splits the market with Time Warner Cable. Cablevision was started by cable pioneer Charles Dolan and is now run by his son, CEO James Dolan. The family has entertained selling the company before, but it was unclear they would ever agree to let go.
But operating in the New York market has become difficult. Cablevision has little room to grow and must compete with an aggressive competitor in Verizon Communications’ FiOS across much of its footprint.
“The time is right for new ownership of Cablevision and its considerable assets. We believe that Patrick Drahi and Altice will be truly worthy successors, and we look forward to doing all we can to affect this transition for our customers and employees. We expect that Cablevision will be in excellent hands,” James Dolan said in a statement on behalf of the family. More of the statement is below.
The agreement calls for Altice to pay $34.90 in cash for each Cablevision Class A and Class B share. The transaction has been approved by Calbevision shareholders, the company said. The Dolans control 72% of the voting stock in the company. Cablevision will not pay a dividend through closing, which is expected in the first half of 2016, subject to regulatory approvals.
The Dolan family will continue to control AMC Networks, which was once Cablvison’s programming arm, and the Madison Square Garden Co., which owns the Knicks, Rangers and a regional sports network.
Given that nothing has come before the FCC, a spokesman declined to comment on the deal, which will get the requisite public interest review by the commission and an antitrust vetting from the Department of Justice.
To the degree that it strengthens Cablevision as a competitor to Comcast, Time Warner Cable (or, if the FCC approves it, Charter-Time Warner Cable-Bright House) and AT&T-DirecTV, the deal could get a favorable nod.
There is no FCC prohibition on foreign ownership of cable television systems, though there is on CARS stations, the microwave systems used by cable operators.
"The acquisition of Cablevision is a good move for Altice's global media strategy," said Adonis Hoffman, chairman of Business in the Public Interest and former chief of staff to FCC commissioner Mignon Clyburn. "It may also be a good move for U.S. consumers by providing another competitor with scale in the market. Of course, one of the true tests will be how it structures programming. I would encourage Altice to be very open to independent and diverse programming and content providers, and build in onramps going into the transaction. This would speak volumes to the industry and the regulators on its intention to advance the public interest in programming."
Diversity commitments, usually volunteered by merging parties at the outset, have become a standard element in merger public interest statements.
“I do not see any regulatory hurdles at this time that would prevent Altice from accomplishing its goal. They will need to run the traps on the Hill, though, where some Members might not be as familiar with the company or its ownership,” said Hoffman.
At a press conference after the FCC's monthly meeting, Wheeler was asked for his reaction to the proposed deal.
He said there were two reactions. The first was that he had known Chuck Dolan and the Dolan family for decades and they were "competitors and innovators in the space."
As to the policy issues, he said that was something that the commission will take on in an "open, fast process." Asked if there was a timeline, he answered, somewhat incredulously that the deal had only been announced at 2 a.m. the night before and that nothing had yet been filed.
As to whether there were any particular issues with a French (foreign) company buying Cablevision, Wheeler said that a multitude of government agencies involved in national security and telecom—dubbed “team telecom”—reviews all such transactions.
According to its website, "Team Telecom is comprised of staff from the Department of Homeland Security, the Department of Justice, Federal Bureau of Investigation, representatives from the Department of Commerce, the Department of Defense, the Department of State, the Department of Treasury, and the Office of the United States Trade Representative. Based on its review, Team Telecom may have no comment on any application or may request that the FCC condition grant of the application on compliance with assurances made by the applicant in either an exchange of letters or a formal security agreement."
Such reviews usually take six months to a year, but can take longer. In any event, the FCC cannot act on an application until the review is completed.
Here is the statement from Cablevision:
“Since Charles Dolan founded Cablevision in 1973, the Dolan family has been honored to help shepherd our customers and employees through the most extraordinary communications revolution in modern history.
Now, nearly half a century later, the time is right for new ownership of Cablevision and its considerable assets. We believe that Patrick Drahi and Altice will be truly worthy successors, and we look forward to doing all we can to affect this transition for our customers and employees. We expect that Cablevision will be in excellent hands.
For the Dolan family, we move forward with AMC Networks and The Madison Square Garden Company – two and, eventually, three public companies – all born of Cablevision and each with brighter prospects today than ever before.
With profound gratitude to our employees, customers and shareholders who have made our vision a reality, the Dolans look forward to continuing this fascinating journey.”
John Eggerton contributed to this report.