Street Scrutinizes Cablevision/VOOM Spin-Off (1 Viewer)


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Sep 8, 2003
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Wall Street reacted to Cablevision's news concerning the proposed spin-off of its recently launched satellite service VOOM along with certain Rainbow Media programming assets.

Said Thomas Eagan of Oppenheimer & Co., "We interpret Cablevision's announcement ... to restructure the previously-announced satellite spin-out as quite provocative as it raises both the risks and rewards from current levels."

Eagan kept his "neutral" rating on the stock. But in a research note, he spoke about a "favorable bias" on the stock, given a possible next step towards further restructuring of the company, with a sale of cable systems or a partner investment in VOOM. "Any pull back in the share price could make our current target of $23.75 that much more appealing," Eagan said.

Doug Shapiro of Banc of America Securities said immediate reaction to the proposed Cablevision spin-off could be negative, "because the contribution of the networks, which we value at $3.2 billion, raises shareholders exposure relative to the prior plan of just contributing $450 million before the spin."

However, Shapiro said the spin-off could prove neutral or positive long term. "VOOM won't likely completely erode the value of the nets; Mr. Dolan's decision to distance himself from Cablevision could raise speculation the cable assets will eventually be sold; and a rise in the value of the new Cablevision post spin could offset any discount applied to the value of the nets," he said.

Still, others in the financial community had downgrades for Cablevision after the spin-off announcement: Prudential Equities lowered its rating on the company to "underweight" from "neutral," and Credit Suisse First Boston cut its Cablevision rating to "underperform" from "neutral"

Last week, Cablevision's board of directors approved an amended plan to spin off its recently launched satellite service VOOM along with three Rainbow Media entertainment services - AMC, The Independent Film Channel and WE: Women's Entertainment - and other businesses.

Cablevision will retain its regional cable and telecommunications businesses, Madison Square Garden and its teams, and Radio City Music Hall. The MSO also will keep other programming businesses, including fuse, Clearview Cinemas, News 12 in New York City, Metro Channels and Rainbow's interest in regional sports networks around the country.

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