Dolan's Could Spark Bidding War - Broadcasting & Cable

Dolan's Could Spark Bidding War

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Cablevision's stock price jumped 19% Monday on news that Chairman Charles Dolan wants to buy its cable systems.

Taking advantage of his company’s sluggish stock price, Dolan has made an offer to buy the company’s cable systems, then spin its programming  networks back out to shareholders.
That could draw other suitors– particularly Time Warner Cable and Comcast – who would love to get their hands on Cablevision’s tight metro New York cluster.

But since the Dolans control the vast majority of Cablevision’s shareholder votes, it would be hard to pry the properties away. The company's stock rose from $26.87 per share to $32.

The proposal calls for the Dolan family – which owns 20% of Cablevision’s equity, but 71% of its shareholder votes – to pay $7.9 billion in cash, or the equivalent $21.50 per share. Shareholders would then get shares in Rainbow Media that the Dolans value $12.50 each, bringing their take to $33.50 per share.

Rainbow Media includes AMC, Madison Square Garden and Independent Film Channel.

If you accept how the Dolans value the Rainbow portion, the offer is a 25% premium over Friday’s trading price.

But the deal will probably become controversial as investors assess it and other companies look for a way into the company.
Alan Bezoza, cable analyst for Friedman Billings Ramsey believes the offer is too low. "Regardless, with 71% of the vote held by the Dolans, we are not sure that investors could prevent them from cheaply gaining control of the cable assets."

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