May 2, 2007
Cablevision Systems Corp. (NYSE: CVC) confirmed reports Wednesday that an independent committee has given its blessing for the Dolan family to take the New York-based MSO private.
Demonstrating that persistence counts, the green light was given on the family's third recent attempt to take Cablevision private, a path already taken by fellow MSOs Cox Communications Inc. and Insight Communications Co. Inc. The Dolans had offered $27 per share in October 2006 and came back with a $30 per share offer in January 2007.
Under the definitive merger agreement, all outstanding shares of Cablevision not already owned by the Dolan Family Group (a party that includes Cablevision CEO James Dolan and Chairman Charles Dolan) will be converted into $36.36 per share in cash. The deal's total value, including debt, is roughly $22 billion.
The Dolan Family Group agreed to put up $2.1 billion in equity tied to the transaction. Merrill Lynch & Co. Inc. , Bear Stearns & Co. Inc. , and Bank of America, meanwhile, have committed to provide $15.5 billion in debt financing.
Cablevisions shares were trading at $35.35 each, up $2.68 (8.20 percent), in midday trading Wednesday.
Cablevision's Special Transaction Committee, its board of directors, and its independent directors all voted in favor of the deal, which remains subject to traditional regulatory approvals.
The Dolan family founded Cablevision in 1973. Today, it serves more than 3.1 million homes in the New York metro area. The company also runs Rainbow Media Holdings, a programming arm that operates networks such as AMC, IFC and WE. Also among Cablevision's holdings are Radio City Music Hall, Clearview Cinemas, Madison Square Garden, the New York Knicks, New York Rangers, and New York Liberty [ed. note: so, in other words, New York].
As with other operators that have taken this route, going private should allow Cablevision, rather than Wall Street, to dictate its pricing and technology strategies. (See Going Private, Cable's New Weapon.)
The family's desire to take Cablevision private underscores its "immense confidence in the free cash flow potential of the business as growth decelerates and capital intensity falls," said Sanford C. Bernstein & Co. Inc. Senior Analyst Craig Moffett, in a research note.
The deal also highlights their "confidence in the resiliency of their business in the face of rising competition from Verizon Communications Inc. (NYSE: VZ)," he added.
To combat that threat in mid-2005, Cablevision start a "targeted deployment" in Oyster Bay, N.Y., of a dedicated, symmetrical, 100-Mbit/s service based on technology from Narad Networks (now PhyFlex Networks Inc. ). In the residential world, operators are also looking to battle fiber-to-the-home deployments with Docsis 3.0, a maturing CableLabs platform that promises to push shared Internet speeds in excess of 100 Mbit/s. (See New Name for Narad and Comcast Preps Docsis 3.0 Trials.)
Moffett said his firm is keeping an Outperform rating on Cablevision with a target price of $40, but he added that a "significantly higher valuation is warranted based on cash generation prospects."
— Jeff Baumgartner, Site Editor, Cable Digital News
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