Shares in Cablevision Systems jumped Monday in the wake of the Dolan family’s bid to take the company private, but the trading action indicates that traders don’t necessarily see a higher offer coming.
Cablevision shares traded at $26.51 mid-afternoon, slightly less than the family’s $27 per share offering price. When the Dolans tried to take the company private last year, the company’s stock zoomed past the per share offering price, in anticipation that the company’s board members would demand a higher price. They did, but the Dolans backed away and scuttled the deal.
That wasn’t the case Monday.
This offer is more likely to succeed than that last one. The last time the Dolans tried to only buy the cable systems, forcing public shareholders to keep it’s Rainbow Media unit. This time they’re bidding for the whole company. Also, the company’s equity base is smaller today. The company borrowed around $3 billion to finance a $10 per share dividend to all shareholders, of which $637 million went to the Dolan family. That twist give the family greater financial capacity and makes the new deal a little easier to finance.
Although Cablevision’s metro New York systems are appealing to other major operators, notably Time Warner Cable and Comcast, Wall Street and industry executives don’t expect the Dolan bid to trigger a bidding war. In a letter, the Dolans told Cablevision’s board, “you should be aware that we are interested only in pursuing the proposed transaction and will not sell our stake in the Company.”