Cablevision May Be Going Private

[Alto101]

It looks like the Dolan's are offering to buy the outstanding shares in Cablevision and spin-off Rainbow Media as a separate company. Charles Dolan would be running Cablevision and James would be running Rainbow Media.

If this would have happened a year ago, maybe we would still be enjoying Voom...

http://www.msnbc.msn.com/id/8287611/

 

[Sean Mota]

Cablevision plans to go private, split firm

Source


Cablevision Systems (NYSE: CVC - News), the USA's No. 6 operator, plans to take its cable systems private while spinning off into a new public company

In a letter to the board Sunday, embattled founder Charles Dolan and his son, CEO James Dolan, said the move will enable the company "to successfully meet the challenges of intensifying telecom and (satellite) competition and new wireless entrants."

The plan is likely to be evaluated by a committee of independent board members, and could take until the year's end to complete.

The Dolans' offer of $33.50 a share in cash and stock values the entire company at about $18.5 billion, a figure that includes $8.9 billion for outstanding debt.

But the Dolans, who control 20% of Cablevision's stock and 71% of the votes, say they'll need to borrow only $6.8 billion from Merrill Lynch and Bank of America to take the cable systems private.

Public investors would get $21 a share in cash for the systems, which have about 3 million subscribers. In addition, they'd get stock, valued at $12.50 a share, in the entertainment and sports company, which would remain under the Dolan family's control.

The proposed public company would house Rainbow Media assets, including cable channels AMC (formerly American Movie Classics), the Independent Film Channel and WE: Women's Entertainment. It also would include New York City's Madison Square Garden and Radio City Music Hall, the NBA's New York Knicks and the NHL's New York Rangers.

The arrangement could soothe frayed nerves in the Dolan family, where Charles and James have battled over the company's direction.

Charles would be the chairman of the cable operation, with son-in-law Tom Rutledge stepping in as CEO. James would be chairman and CEO of the publicly traded entertainment company. The Dolans told the board that their proposal offers shareholders a 25% premium over Cablevision's market value. Shares closed Friday at $26.87.

The Dolans have alienated many on Wall Street with a series of perplexing decisions. The board shot down Charles' effort to create a high-definition-TV satellite service called Voom. The company picked fights with New York City Mayor Michael Bloomberg and Time Warner, making a seemingly futile last-minute bid for Adelphia in an auction that Time Warner and Comcast won with a joint $17.6 billion offer.

Prudential Equity Group's Katherine Styponias this month said in a report that she slashed her valuation of the company by 25% "to account for management history of making decisions that have hurt shareholder value."

The Dolans' plan has precedent. Cox Communications and Mediacom took similar steps

 

[Sean Mota]

Sorry I did not see this... Moving to Cablevision forum...

 

[Sean Mota]

I can see right now Rainbow Media going down the drain with James Dolan as CEO. This includes the VOOM channels. So one more year until everything goes down the drain with James Dolan as CEO. Sad but it's true. Anything that James touches turns into trash...

 

[Sean Mota]

Update...

Source

June 20 (Bloomberg) -- The billionaire Dolan family, which controls Cablevision Systems Corp., offered to buy the portion of the company it doesn't already own in a $7.9 billion transaction that would take the company private.

Shareholders of Cablevision, the largest cable-television provider in the New York area, would receive $33.50 per share, or 25 percent more than the $26.87 closing price on June 17, the company said in a statement distributed today on PR Newswire. Non- cable assets including the New York Knicks basketball team, Radio City Music Hall and Madison Square Garden would be spun

==========================
Editorial: Or this may be a way for Cablevision to be sold...?

 

[Sean Mota]

Here's the Entire Letter

Source


Board of Directors
Cablevision Systems Corporation
1111 Stewart Avenue
Bethpage, NY 11714-3581

Members of the Board of Directors:

Charles F. Dolan and James L. Dolan, on behalf of members of the Dolan family (the "Family Group") who own approximately 20% of the common stock (representing approximately 71% of the voting power) of Cablevision Systems Corporation (the "Company"), are pleased to submit this proposal for a transaction which delivers value of $33.50 per share to the Company's public stockholders. Under our proposed transaction, (1) Rainbow Media Holdings ("Rainbow") would be distributed to all Company stockholders on a pro rata basis and (2) the public stockholders would receive $21.00 per share in cash in connection with a merger of the Company with an entity owned by the Family Group (the "Transaction"). Merrill Lynch & Co. ("Merrill Lynch") and Banc of America Securities LLC, Bank of America, N.A., and certain of their affiliates ("Bank of America") have agreed to fully finance the cash payment to the public stockholders.

We believe that our proposal is fair to and in the best interests of the Company and its public stockholders.


-- The Transaction does not involve a change of control, yet the
consideration to be received by the public stockholders represents a
25% premium over Friday's closing price and a 27% premium to the
average closing price of the Class A common stock for the last 30 days.

-- The cash payment of $21.00 per share values the cable and
telecommunications business at $4,377 per cable subscriber,
substantially higher than recent comparable transactions.

-- The proposal would also unlock the significant value of the Company's
scarce programming and sports assets, including four national cable
networks, strong regional sports networks and one of the world's finest
sports and entertainment arenas - Madison Square Garden.

-- When adjusted for the estimated value of $12.50 per Company share from
the distribution of Rainbow (in line with Wall Street analysts'
estimates of value of $9 - $15 per Company share), the premium offered
for the Company's core cable and telecommunications business is
approximately 46%.

As you are aware, with new technologies and competitors redefining content delivery, the cable and telecommunications business has entered a new and challenging era. We strongly believe that a long term, entrepreneurial management perspective - not constrained by the public markets' tendency to focus on short term results - will better enable a new entity consisting of the cable and telecommunications business ("Telecom") to successfully meet the challenges of intensifying telecom and DBS competition and the risk of new wireless entrants. The Family Group is willing to assume the risks of full ownership and our proposal will ensure the Company has the flexibility in the future to compete effectively. We are convinced that private ownership of Telecom is highly desirable and will allow the new entity to attain its long- term business objectives.

We anticipate that Charles Dolan would be the Chairman of Telecom, James Dolan would be the Chairman and CEO of Rainbow and a director of Telecom, Thomas Rutledge would be the CEO of Telecom, and Hank J. Ratner would be the Vice Chairman of Rainbow. Our proposal contemplates that the existing arrangements between Telecom and Rainbow are preserved in a manner consistent with the Company's current budget and long-term plan.

The total funds necessary to consummate the Transaction (including refinancing the Company's existing credit facility) are expected to be approximately $6.8 billion. As noted, these funds would be provided by committed debt financing from Merrill Lynch and Bank of America. Copies of the executed commitment letters will be delivered to you under separate cover. Representatives of Merrill Lynch and Bank of America stand ready to discuss the financing.

The organizational structure and key assets of Telecom and Rainbow are illustrated in Annex A and details of the contemplated capital structure of Telecom as a result of the Transaction are contained in Annex B.

Given our involvement with the Company, we anticipate that the Board of Directors will form a special committee of independent directors (the "Committee") to respond to our proposal on behalf of the Company's public shareholders. We encourage the Committee to retain its own legal and financial advisors to assist in its review.

The Board of Directors should be aware that we do not intend to pursue our proposal without the approval of the Committee. We request the opportunity to present fully our proposal to the Committee and answer any questions at the Committee's earliest convenience. We will soon be prepared to provide the Committee and its legal and financial advisors with draft agreements documenting the Transaction and to expeditiously negotiate definitive forms of such agreements. Obviously, neither the Company, on the one hand, nor the Family Group, on the other, will have any legal obligation relating to the Transaction until mutually satisfactory definitive agreements have been executed by all parties.

In considering our proposal, you should be aware that we are interested only in pursuing the proposed transaction and will not sell our stake in the Company.

We will, of course, promptly file with the SEC an amendment to our Schedule 13-D, in compliance with our legal obligations, which will include a copy of this letter. We also believe it is appropriate for us to issue a press release announcing our intention to commence this process. A copy is attached for your information. We expect to issue the press release the morning of Monday, June 20th, prior to opening of trading.

Again, we welcome the opportunity to discuss with you all aspects of this proposal and are prepared to commence negotiations with respect to the Transaction immediately. Please contact us at your earliest convenience.


We look forward to hearing from you and appreciate your consideration of
this important matter.

Sincerely,

Charles F. Dolan

James L. Dolan


ANNEX A

The following table illustrates the organizational structure and key assets of Telecom and Rainbow:


Cablevision

Telecom Rainbow

Transaction: Family Group takes private Pro rata spin-off to all
shareholders

Key Assets: Cable National Cable Networks
Lightpath (AMC, IFC, WE)
Public Securities MSG
(excluding GE Regional Sports Networks
stock) fuse
News 12
VOOM 21
Clearview Cinemas
Public Securities -
- GE
stock

Value Per Share: $21.00 per share in cash $12.50 per share in Rainbow


(10.9x LTM EBITDA and
$4,377 per Cable subscriber)


ANNEX B

The following table details the capital structure of Telecom pro forma for the Transaction proposed by the Family Group (the Transaction does not require incremental debt at Rainbow):


Telecom Pro Forma Capital Structure
(Dollars in Millions)

Pro Forma
Q4 Est. 2005

Total Cash -

New OpCo Bank Debt $2,311
Existing OpCo Notes (CSC Holdings and CVC) 5,944
New HoldCo Notes 4,250
Capital Leases 4
-----
Total Debt $12,508

Net Debt $12,508




--------------------------------------------------------------------------------
Source: Dolan Family GroupBoard of Directors
Cablevision Systems Corporation
1111 Stewart Avenue
Bethpage, NY 11714-3581

Members of the Board of Directors:

Charles F. Dolan and James L. Dolan, on behalf of members of the Dolan family (the "Family Group") who own approximately 20% of the common stock (representing approximately 71% of the voting power) of Cablevision Systems Corporation (the "Company"), are pleased to submit this proposal for a transaction which delivers value of $33.50 per share to the Company's public stockholders. Under our proposed transaction, (1) Rainbow Media Holdings ("Rainbow") would be distributed to all Company stockholders on a pro rata basis and (2) the public stockholders would receive $21.00 per share in cash in connection with a merger of the Company with an entity owned by the Family Group (the "Transaction"). Merrill Lynch & Co. ("Merrill Lynch") and Banc of America Securities LLC, Bank of America, N.A., and certain of their affiliates ("Bank of America") have agreed to fully finance the cash payment to the public stockholders.

We believe that our proposal is fair to and in the best interests of the Company and its public stockholders.


-- The Transaction does not involve a change of control, yet the
consideration to be received by the public stockholders represents a
25% premium over Friday's closing price and a 27% premium to the
average closing price of the Class A common stock for the last 30 days.

-- The cash payment of $21.00 per share values the cable and
telecommunications business at $4,377 per cable subscriber,
substantially higher than recent comparable transactions.

-- The proposal would also unlock the significant value of the Company's
scarce programming and sports assets, including four national cable
networks, strong regional sports networks and one of the world's finest
sports and entertainment arenas - Madison Square Garden.

-- When adjusted for the estimated value of $12.50 per Company share from
the distribution of Rainbow (in line with Wall Street analysts'
estimates of value of $9 - $15 per Company share), the premium offered
for the Company's core cable and telecommunications business is
approximately 46%.

As you are aware, with new technologies and competitors redefining content delivery, the cable and telecommunications business has entered a new and challenging era. We strongly believe that a long term, entrepreneurial management perspective - not constrained by the public markets' tendency to focus on short term results - will better enable a new entity consisting of the cable and telecommunications business ("Telecom") to successfully meet the challenges of intensifying telecom and DBS competition and the risk of new wireless entrants. The Family Group is willing to assume the risks of full ownership and our proposal will ensure the Company has the flexibility in the future to compete effectively. We are convinced that private ownership of Telecom is highly desirable and will allow the new entity to attain its long- term business objectives.

We anticipate that Charles Dolan would be the Chairman of Telecom, James Dolan would be the Chairman and CEO of Rainbow and a director of Telecom, Thomas Rutledge would be the CEO of Telecom, and Hank J. Ratner would be the Vice Chairman of Rainbow. Our proposal contemplates that the existing arrangements between Telecom and Rainbow are preserved in a manner consistent with the Company's current budget and long-term plan.

The total funds necessary to consummate the Transaction (including refinancing the Company's existing credit facility) are expected to be approximately $6.8 billion. As noted, these funds would be provided by committed debt financing from Merrill Lynch and Bank of America. Copies of the executed commitment letters will be delivered to you under separate cover. Representatives of Merrill Lynch and Bank of America stand ready to discuss the financing.

The organizational structure and key assets of Telecom and Rainbow are illustrated in Annex A and details of the contemplated capital structure of Telecom as a result of the Transaction are contained in Annex B.

Given our involvement with the Company, we anticipate that the Board of Directors will form a special committee of independent directors (the "Committee") to respond to our proposal on behalf of the Company's public shareholders. We encourage the Committee to retain its own legal and financial advisors to assist in its review.

The Board of Directors should be aware that we do not intend to pursue our proposal without the approval of the Committee. We request the opportunity to present fully our proposal to the Committee and answer any questions at the Committee's earliest convenience. We will soon be prepared to provide the Committee and its legal and financial advisors with draft agreements documenting the Transaction and to expeditiously negotiate definitive forms of such agreements. Obviously, neither the Company, on the one hand, nor the Family Group, on the other, will have any legal obligation relating to the Transaction until mutually satisfactory definitive agreements have been executed by all parties.

In considering our proposal, you should be aware that we are interested only in pursuing the proposed transaction and will not sell our stake in the Company.

We will, of course, promptly file with the SEC an amendment to our Schedule 13-D, in compliance with our legal obligations, which will include a copy of this letter. We also believe it is appropriate for us to issue a press release announcing our intention to commence this process. A copy is attached for your information. We expect to issue the press release the morning of Monday, June 20th, prior to opening of trading.

Again, we welcome the opportunity to discuss with you all aspects of this proposal and are prepared to commence negotiations with respect to the Transaction immediately. Please contact us at your earliest convenience.


We look forward to hearing from you and appreciate your consideration of
this important matter.

Sincerely,

Charles F. Dolan

James L. Dolan


ANNEX A

The following table illustrates the organizational structure and key assets of Telecom and Rainbow:


Cablevision

Telecom Rainbow

Transaction: Family Group takes private Pro rata spin-off to all
shareholders

Key Assets: Cable National Cable Networks
Lightpath (AMC, IFC, WE)
Public Securities MSG
(excluding GE Regional Sports Networks
stock) fuse
News 12
VOOM 21
Clearview Cinemas
Public Securities -
- GE
stock

Value Per Share: $21.00 per share in cash $12.50 per share in Rainbow


(10.9x LTM EBITDA and
$4,377 per Cable subscriber)


ANNEX B

The following table details the capital structure of Telecom pro forma for the Transaction proposed by the Family Group (the Transaction does not require incremental debt at Rainbow):


Telecom Pro Forma Capital Structure
(Dollars in Millions)

Pro Forma
Q4 Est. 2005

Total Cash -

New OpCo Bank Debt $2,311
Existing OpCo Notes (CSC Holdings and CVC) 5,944
New HoldCo Notes 4,250
Capital Leases 4
-----
Total Debt $12,508

Net Debt $12,508




--------------------------------------------------------------------------------
Source: Dolan Family Group

 

[riffjim4069]

Cablevision sure blew their VOOM DBS and intense pressure from Verizon could place a serious hurtlock on their future success. Perhaps they should sell.

 

[Scott Greczkowski]

This just in from our friends at MultiChannel News

Dolans in Spin Mode

By Linda Moss
Multichannel News
6/20/2005 10:31 AM

The Dolan family is looking to take Cablevision Systems Corp. private and to spin off a separate company for its entertainment assets, including its cable networks like American Movie Classics.

Cablevision chairman Charles Dolan and CEO James Dolan are making a $7.9 billion bid, at $21 per share in cash, to make its cable-system operation a private entity. Cablevision stockholders would also get a share in the new company, Rainbow Media Holdings, which would not only include networks like AMC and WE: Women's Entertainment, but also regional sports channels, Madison Square Garden, Radio City Music Hall, the National Basketball Association's New York Knicks and the National Hockey League's New York Rangers.

The Dolans sent a letter to Cablevision's board Sunday outlining their offer and also saying that the cable systems need to be out of the public's close scrutiny so that they can better compete with rivals and deploy advanced new technologies.

For more -- including the full text of the Dolans' letter to Cablevision's board -- click below (no subscription required) . . .

http://email.multichannel.com/cgi-bin2/DM/y/emZe0KPZ8f0OZJ0CWFW0AO

 

[salsadancer7]

Could Charles be linning up something up to be a newer. more improved version of VOOM where old subscribers user their old boxes? Naaaaaahhhhhh.....to much wishful thinking.....

 

[Ilya]

Father and son filing a separation...

 

[vurbano]

I wish this happened a year ago

 

[rang1995]

public private i just want more HD on CVC

still having VOOM withdrawl

 

[Sean Mota]

Another Spin

The problem for cable is its inability to assuage investors' fears about the growing threat of competition from regional Bell telephone companies and satellite broadcasters.

Cablevision (CVC: news, chart, profile) is set to become the third cable operator in less than a year to take itself private. See full story.

Cox Enterprises completed a $6.6 billion cash tender for the shares of Cox Communications in December, and in March, the co-founders of Insight Communications (ICCI: news, chart, profile) and a private equity firm offered to take Insight private for $650 million.

While Cablevision has outperformed the S&P 500 (SPX: news, chart, profile) since mid-January, when the market began to cheer an imminent shutdown and sale of its money-losing Voom satellite business, other cable stocks have underperformed that benchmark.

Investors are probably overestimating the threat posed by regional Bell phone companies, at least in the short term, says Matt Harrigan, cable analyst at Janco Partners in Denver. However, the responsibility for making that clear lies with cable operators.

"I think they have to show that they can get voice out, and hurt the RBOCs before the RBOCs can make any meaningful inroads into the video business," said Harrigan.

Phone companies, already able to offer broadband, landline and mobile phone service, want to be able to bundle video with that package, a deal which would undoubtedly be attractive to consumers.

However, the phone companies face serious hurdles. Among them is the cumbersome process of getting approval from various municipalities to build networks that will carry video signals. Though Verizon (VZ: news, chart, profile) won permission from the state of New York to do so without getting permission from each city it intends to reach, the company ran into a roadblock in Texas, where the state legislature rejected a bill that would've given it permission to skip those approvals.

In addition, the phone companies are also obligated to expensive three-year labor agreements that will add significant costs to the effort to build out video networks.

Taking advantage of VOD

Cable operators may also need to bid aggressively on highly desirable VOD content, in an effort to increase awareness and acceptance of a product it is in a unique position to offer, Greenfield said.

Of course, any major increase in spending would hamper the cable operators' near-term results, and the stocks would suffer further.

So far, the Hollywood studios have been rather lukewarm on VOD, seeking to protect their profits from DVD sales and rentals.

VOD was never regarded as a "killer application" that would be a huge money maker for cable, says Mike Paxton, senior analyst at In-Stat in Scottsdale, Ariz., though he does believe the service has been successful in its early stages.

Comcast (CMCSK: news, chart, profile) and Time Warner (TWX: news, chart, profile) , are among the main advocates of the technology. They've spoken glowingly about the consumer response to subscription VOD, which lets viewers watch as many on-demand shows as they like with the cost embedded in the monthly bill.

The apparent sticking point for some members of the investment community is which economic model will prevail. "Do you provide it for free? Do you charge people for it? How do you reimburse the movie studios and the broadcasters for the content? There are still a lot of questions surrounding that," Paxton said.

Against the current backdrop, it's difficult for some Wall Street investors to get excited about cable, Harrigan said.

"In talking to the investment community, cable companies don't make a strong enough case about the strengths of their services and products," said Paxton. "And I don't think they compare and contrast their services well enough with their competitors, about why their network gives them an advantage in offering high-definition TV channels, interactive TV services, or .... the total reach of the cable network in this country."

SOURCE

 

[Sean Mota]

I have never understood why VOD is a killer application. Why? Why?

 

[Sean Mota]

Malone is over all this proposal?

Others, however, sense Cablevision's timing is also related to Malone's stepping down from the board on June 6. The Liberty Media chairman, who had joined Cablevision's board only three months earlier as part of a dramatic restacking of directors by Chuck Dolan, said in a filing "he was resigning to avoid any potential concerns that could arise from his being a director of the companies and Liberty Media Corporation, each of which owns programming companies."

Because plans such as the one Cablevision announced Monday don't hatch overnight, as one source put it, Malone was likely there for its genesis. So, too, were Rand Araskog, Frank Biondi and Leonard Tow, whom Dolan père also placed on his board after ejecting three doubters of his ambitious satellite-broadcasting plan. (The Voom satellite operation was shuttered in April after a dramatic father-son confrontation between Chuck and James.)

Liberty Media had no comment on Malone's possible role in the Dolans' proposal. But Robert Routh, Jefferies & Co.'s senior media-and-entertainment analyst, is one of those who links the man with the plan. "These guys probably put together a strategic plan for Chuck Dolan," he said of the restacked board. "This even looks like a Malone deal."

For that reason, Routh continued, Malone's board resignation can be viewed as "a clue" to the two-part process he now expects to unfold: 1) the Dolans, who own 20% of Cablevision stock but control 71% of the vote through a special share class, will need a sweetener before successfully taking their cable operation private; and 2) the spinoff of Rainbow "positions it for a deal of its own," despite the pro-rata split from Cablevision leaving the Dolans with 71% of its vote.

As a publicly traded company, Rainbow would include the three cable networks — AMC, IFC and WE: Women's Entertainment; some regional sports networks; Madison Square Garden; the New York Knicks basketball team; the New York Rangers hockey team; Radio City Music Hall; News 12; and Clearview Cinemas. As such, it could fit nicely with Liberty Media's networks group, anchored by Starz Entertainment Group LLC's 14-channel premium-movie operation, which at some point may also seek to delineate itself as a pure-play content company.

Malone's quest to reduce the net-asset discount on Liberty Media's complicated portfolio, recently estimated in excess of 30%, has already prompted the spinoff of international assets and a commitment to combine company interests in Discovery Communications Inc. and Ascent Media Group Inc. into a new publicly traded entity. In addition to gaining the same sort of simplicity as Discovery Holding Co., Liberty Media's networks group could add considerable scale by bringing Starz and Rainbow together.

Such maneuvering, meanwhile, would enable the Dolans to take their cable operation private for what Routh called "a cheap valuation." Then, after keeping it in the family until the cable market appreciates, they could sell at a full multiple to an obvious suitor such as Time Warner Cable.

However, in their letter to the board about their going-private plan, the Dolans insisted "we are interested only in pursuing the proposed transaction and will not sell our stake in the company." Yet that may not always be true and, according to Routh, may not be true for long. "If the plan solicits some other strong bidders," he said, "we'll find out then if it's just posturing."

Charles and James Dolan have retained law firm Debevoise & Plimpton LLP and are receiving financial advice from Merrill Lynch & Co. and Banc of America Securities LLC. The two investment banks have also agreed to fully finance the cash consideration payable to the public stockholders.

In their letter to the board, the Dolans said they expected the formation of a special committee of independent directors to consider the proposal on behalf of Cablevision's public shareholders. That committee is expected to retain its own legal and financial advisers but has yet to announce doing so.

Source

 

[cablewithaview]

Cablevision Systems Corp.’s stock rose as high as 25% Monday -- the same amount as the premium Cablevision calculated the Dolan Family Group’s offer to buy out public shareholders was worth in its effort to take the cable company private and spin out the Rainbow Media Holdings LLC programming subsidiary to shareholders.

At a little after 4 p.m. (EST), Cablevision’s stock had kept much of that bump: It was priced at $32 per share, up $5.18 (19%) in NASDAQ trading. The stock had closed at $26.87 last Friday, and a 25% premium on that would be about $33.59 per share. The intraday high Monday was $33.75.

As reported, Cablevision chairman Charles Dolan and CEO James Dolan made what they called a $7.9 billion bid -- $21 per share in cash and stakes in Rainbow worth $12.50 per share -- to take its cable-system operation private.

Cablevision stockholders, along with cash, would get a share in Rainbow Media Holdings, which would not only include networks like AMC and WE: Women’s Entertainment, but also regional sports channels, Madison Square Garden, Radio City Music Hall, the National Basketball Association’s New York Knicks and the National Hockey League’s New York Rangers.

Charles Dolan would be chairman of the private cable company, and the CEO would be Thomas Rutledge, currently Cablevision’s chief operating officer. James Dolan would be chairman and CEO of Rainbow.

The question Monday posed by analysts was whether or not the Dolans’ move -- similar to one by Cox Enterprises Inc. last year -- to take Cablevision private would invite other bidders to step in and try to wrest away the cable company’s 3 million customers clustered in the New York metropolitan area.

The likeliest candidate would be Time Warner Inc., which operates in Manhattan and other areas in the region, but Comcast Corp. could be interested, as well, even though it is brushing up against theoretical subscriber-cap limits in terms of its pending acquisition of properties from Adelphia Communications Corp. and Time Warner Cable.

UBS Securities LLC analyst Aryeh Bourkoff said in a note to investors that UBS had stuck an estimated $40-per-share breakup value on Cablevision, so shareholders might want a higher price.

Craig Moffett, of Sanford C. Bernstein & Co., said in a note that for Cablevision, “The question is whether the Dolan bid will draw a competing bid from [Time Warner], or even from other private-equity buyers.

The Dolans' voting control could effectively block any competing offer, and the Dolans have reportedly said they will not entertain third-party offers for the company. (The Dolans own a 24% equity interest in the company but control 76% through supervoting shares.) However, given the history of corporate governance at Cablevision, the independent directors will undoubtedly be subjected to a high degree of scrutiny during the review process.”

Moffett said it was possible that Time Warner or private-equity firms might make an independent bid.

Time Warner and Comcast shares were up about 1.5%-2% by late Monday afternoon.

The Dolans sent a letter to Cablevision’s board Sunday outlining their offer and also saying that the cable systems need to be out of the public’s close scrutiny so that they can better compete with rivals and deploy advanced new technologies.

Following is the text of the Dolans’ letter to Cablevision’s board:

Charles F. Dolan and James L. Dolan, on behalf of members of the Dolan family (the “Family Group”) who own approximately 20% of the common stock (representing approximately 71% of the voting power) of Cablevision Systems Corporation (the “Company”), are pleased to submit this proposal for a transaction which delivers value of $33.50 per share to the Company’s public stockholders.

Under our proposed transaction, (1) Rainbow Media Holdings (“Rainbow”) would be distributed to all Company stockholders on a pro rata basis and (2) the public stockholders would receive $21.00 per share in cash in connection with a merger of the Company with an entity owned by the Family Group (the “Transaction”). Merrill Lynch & Co. (“Merrill Lynch”) and Banc of America Securities LLC, Bank of America N.A., and certain of their affiliates (“Bank of America”) have agreed to fully finance the cash payment to the public stockholders.

We believe that our proposal is fair to and in the best interests of the Company and its public stockholders.

The Transaction does not involve a change of control, yet the consideration to be received by the public stockholders represents a 25% premium over Friday's closing price and a 27% premium to the average closing price of the Class A common stock for the last 30 days.

The cash payment of $21.00 per share values the cable and telecommunications business at $4,377 per cable subscriber, substantially higher than recent comparable transactions.

The proposal would also unlock the significant value of the Company’s scarce programming and sports assets, including four national cable networks, strong regional sports networks and one of the world’s finest sports and entertainment arenas -- Madison Square Garden.

When adjusted for the estimated value of $12.50 per Company share from the distribution of Rainbow (in line with Wall Street analysts’ estimates of value of $9-$15 per Company share), the premium offered for the Company’s core cable and telecommunications business is approximately 46%.

As you are aware, with new technologies and competitors redefining content delivery, the cable and telecommunications business has entered a new and challenging era. We strongly believe that a long-term, entrepreneurial-management perspective -- not constrained by the public markets’ tendency to focus on short-term results -- will better enable a new entity consisting of the cable and telecommunications business (“Telecom”) to successfully meet the challenges of intensifying telecom and DBS competition and the risk of new wireless entrants.

The Family Group is willing to assume the risks of full ownership, and our proposal will ensure the Company has the flexibility in the future to compete effectively. We are convinced that private ownership of Telecom is highly desirable and will allow the new entity to attain its long-term business objectives.

We anticipate that Charles Dolan would be the Chairman of Telecom, James Dolan would be the Chairman and CEO of Rainbow and a director of Telecom, Thomas Rutledge would be the CEO of Telecom and Hank J. Ratner would be the Vice Chairman of Rainbow. Our proposal contemplates that the existing arrangements between Telecom and Rainbow are preserved in a manner consistent with the Company’s current budget and long-term plan.

The total funds necessary to consummate the Transaction (including refinancing the Company's existing credit facility) are expected to be approximately $6.8 billion. As noted, these funds would be provided by committed debt financing from Merrill Lynch and Bank of America. Copies of the executed commitment letters will be delivered to you under separate cover. Representatives of Merrill Lynch and Bank of America stand ready to discuss the financing.

Given our involvement with the Company, we anticipate that the Board of Directors will form a special committee of independent directors (the “Committee”) to respond to our proposal on behalf of the Company’s public shareholders. We encourage the Committee to retain its own legal and financial advisors to assist in its review.

The Board of Directors should be aware that we do not intend to pursue our proposal without the approval of the Committee. We request the opportunity to present fully our proposal to the Committee and answer any questions at the Committee’s earliest convenience. We will soon be prepared to provide the Committee and its legal and financial advisors with draft agreements documenting the Transaction and to expeditiously negotiate definitive forms of such agreements. Obviously, neither the Company, on the one hand, nor the Family Group, on the other, will have any legal obligation relating to the Transaction until mutually satisfactory definitive agreements have been executed by all parties.

In considering our proposal, you should be aware that we are interested only in pursuing the proposed transaction and will not sell our stake in the Company.

We will, of course, promptly file with the SEC an amendment to our Schedule 13-D, in compliance with our legal obligations, which will include a copy of this letter. We also believe it is appropriate for us to issue a press release announcing our intention to commence this process. A copy is attached for your information. We expect to issue the press release the morning of Monday, June 20th, prior to opening of trading.

Again, we welcome the opportunity to discuss with you all aspects of this proposal and are prepared to commence negotiations with respect to the Transaction immediately. Please contact us at your earliest convenience.

We look forward to hearing from you and appreciate your consideration of this important matter.

 

[riffjim4069]

I can see right now Rainbow Media going down the drain with James Dolan as CEO. This includes the VOOM channels. So one more year until everything goes down the drain with James Dolan as CEO. Sad but it's true. Anything that James touches turns into trash...

Do you think Dolan Sr. would let Jr. get his mits on VOOM21 after what happened with VOOM DBS? IMO, it makes more sense that Rainbow Media would form some sort of a relationship with Malone's Liberty Media. VOOM21 was clearly omitted from SEC filings: Will Dolan Sr. retain control of them? Will they be included with Rainbow Media assets? Or have other ownership and distribution channels already been formed (i.e. Echostar) that have not been announced?

What will happen do VOOM21s guaranteed funding for the next 5 years? Didn't Cablevision pledge to fund the VOOM channels for something like 100+ million a year?

This maneuver to take Cablevision private raises plenty of questions and concerns?

 

[Sean Mota]

I won't be too happy with Malone taking over Rainbow Media either. Look at how StarzHD is run and look how Encore HD was dropped. I personally believe that we saw the best of Voom 21 and it will not get better than we saw. From now on, you will see decisions made that are politically motivated (within the company) and in not the best interest of HD. Sorry that this will happen, but I really want someone to tell me that I am wrong and things will look better down the road.

 

[Sean Mota]

Wall Street Scrambles to Analyze Cable Deal

from NYTimes.com


Some head-scratching investors looked for ulterior motives: Are the Dolans trying to put the company in play? Is the deal a result of the family's feud? Has taking the company private been the plan all along?

The Dolans, who own 71 percent of the voting rights of Cablevision but only 20 percent of its shares, seem to believe that the company is vastly undervalued and that it can be bought on the cheap. And then there are the ancillary benefits: Charles F. Dolan, the company's 78-year-old founder, who has long taken risks that public shareholders could not always stomach, would be able to run the company as he chose, without the constant need to meet quarterly earnings expectations.

Some analysts also suggested that such a deal would give the Dolans flexibility to sell the cable systems later to a suitor - Time Warner is the most frequently mentioned buyer - at a considerably higher takeover premium than they could extract now for their supervoting shares, what with minority shareholders able to demand to be treated equally.

Or the family could decide to take the company public again later if the valuations for cable rise. The Cox family, which recently took Cox Communications private, citing many advantages similar to those that the Dolans espoused, has gone from private to public and back again twice in the last two decades.

If the Dolans were to put anything up for sale, some investors suggested that it would be the entertainment assets, not the cable systems. Some speculated that John C. Malone, the serial deal maker who is the chairman of Liberty Media, would make a run for those assets. He recently resigned from Cablevision's board "to avoid any potential concerns that could arise from his being a director of the companies and Liberty Media," according to the company.

One thing was not up for debate yesterday: the Dolans will need to raise their bid if it is going to be approved by a special committee of the company's independent directors. Cablevision, with three million subscribers in the suburbs of New York, is considered one of the most valuable systems in the nation because it is in the No. 1 media market.

Analysts universally called the Dolans' offer simply an opening bid.

"While we applaud management's move to unlock value, we believe this is a move to cheaply take control of the cable assets," Alan Bezoza, an analyst at Friedman, Billings, Ramsey & Company, said in a note.

How much the Dolans may have to raise their bid remains unclear.

Matthew Harrigan, a managing director at Janco Partners in Denver, said Cablevision's shares would be worth "well into the $40's" if the company were put up for auction, but because of the family's control, he doubts shareholders would see much beyond a "slight" sweetening of the Dolan family's bid.

"You either get this bid, or a slight sweetener, or you get the status quo." He added: "The Dolans have really found the sweet spot."

 

[Tvlman]

0bviously Charles Dolan wants to avoid what happened to the Adelphia owners with his future enterprise plans. However, what about James Dolan? If he is put in charge of VOOM that's the end of it. On the other hand, without the stockholders to complain to for leverage against his father then maybe James' future/doom is sealed.