Cablevision's Dolans Offer to Take Company Private


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Jan 4, 2006
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Cablevision's Dolans Offer to Take Company Private (Update3)

By Rebecca Barr and Cecile Daurat

Oct. 9 (Bloomberg) -- Cablevision Systems Corp.'s Dolan family made a second attempt to take the company private in a transaction that values the cable-television operator and owner of the New York Knicks basketball team at about $7.9 billion.

The Dolans bid $27 a share, the Bethpage, New York-based company said today in a statement. The offer is a 13 percent premium to the closing price last week. Including debt, the Dolans' plan values Cablevision at $19.2 billion.

The decision by the family to wrest complete ownership of the company they founded in 1954 comes less than a year after an initial offer failed. In a letter to the board, Chairman Charles Dolan, and his son, Chief Executive Officer James Dolan, 51, said rising competition in the industry will require ``entrepreneurial management'' that public markets don't allow.

``It's a little surprising that have come back so quickly,'' said Andrew Baker, an analyst at Cathay Financial in New York, who rates the stock ``neutral'' and said he doesn't own it. ``We know they want to take the company private. It makes a lot of sense for them and for the public.''

Shares of Cablevision, also owner of Madison Square Garden stadium, rose $3.06, or 13 percent, $26.99 at 9:35 a.m. in New York Stock Exchange composite trading. The shares were up 2 percent this year before today, excluding a $10 a share dividend payment in April.

The Dolans own 22.5 percent of the company's common stock and command about 74 percent of the voting power.

`Decent Premium'

Companies have gone private at a record pace this year. Private equity and management buyout groups have announced a record $496 billion of acquisitions, compared with last year's total of $216 billion, according to Bloomberg data. Cablevision is adding to the list of companies, also including Harrah's Entertainment Inc., the world's largest casino company, and Kinder Morgan Inc.

The offer is 15 percent higher than last year's proposal after accounting for the $10 dividend, the Dolans said.

The board rejected the previous offer in October last year partly because the price was deemed too low and because the bid included spinning off Cablevision's non-cable systems assets such as the Knicks and Madison Square Garden.

Today's bid ``has a reasonable chance of success,'' said Aryeh Bourkoff, an analyst at UBS AG who rates the shares ``neutral.'' ``It's a premium to what they offered last time and the structure is much simpler.''

Bourkoff, the top-ranked analyst by Institutional Investor magazine, has a price target of $27 for the shares and doesn't own them.


The Dolans are being advised by Merrill Lynch & Co. and Bear, Stearns & Co. The acquisition will cost the family $10.9 billion, including refinancing of credit facilities, the Dolans said. The family will reinvest all its shares in the company for a value of about $1.7 billion and the rest will be debt-financed.

``Responding to the intensifying competition in our industry and the risk of new entrants will require a long-term, entrepreneurial management perspective that is not constrained by the constant focus on short-term results demanded by the public equity markets,'' the Dolans said in a letter contained in the company's statement.

Cablevision traces its roots back 52 years, when Charles Dolan, who goes by ``Chuck,'' helped form a cable-TV business called Sterling Manhattan Cable. The cable-TV operator that would become Cablevision was created in 1973 with 1,500 Long island customers. The company now has 3 million clients in New York State.

In 1980, Dolan expanded in cable-TV networks, adding the Bravo and the American Movie Classics channels. The company sold shares to the public six years later.


The family said it isn't interested in selling its stake in the company and is only interested in the proposed transaction, indicating it isn't fishing for an alternative offer.

While the shares are up 16 percent in the past two years, excluding the $10 dividend payment, Cablevision shareholders have endured boardroom wrangling and failed attempts to expand.

Charles Dolan staged a boardroom coup in March 2005 and battled other directors over closing the Voom satellite service. James Dolan led a fight with New York over the city's plans for a new stadium and a failed effort to buy Adelphia. Last month, the company restated results because it had granted backdated options to company officials, including a dead executive.

``There's what's called the `Dolan discount' because we don't know what to expect of them,'' said David Joyce, an analyst at Miller Tabak & Co. who rates the shares ``neutral'' and doesn't own them.

To contact the reporter on this story: Rebecca Barr in New York at ; Cecile Daurat in New York at .

Last Updated: October 9, 2006 09:37 EDT
Wonder if the timing of this has anything to do with the SEC investigating the granting of stock options. CV has publicly admitted they granted them to a dead person, could there be other things they didn't tell us that the SEC will come down hard on them for?

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