October 17, 2007
The Dolan Family Group (DFG) is standing pat on its offer to take Cablevision Systems Corp. (NYSE: CVC) private for $10.6 billion, even though investors, including the MSO's largest institutional shareholder, plan to oppose the deal when it's voted on next week. (See Cablevision Sets Shareholder Vote .)
In a statement issued Tuesday night, Cablevision president and CEO James Dolan said the family "has no intention of modifying its accepted offer to acquire all outstanding shares of Cablevision that the DFG does not already own." (See Dolan Offer Stands.) Likewise, the Cablevision chief appears resigned to his fate should shareholders scuttle the privatization bid.
"We are looking forward to next week's vote and hope that the transaction is approved, but I'd underscore that I am completely prepared to continue to lead the company into the future as a public company if the transaction is not approved," Dolan added.
The family has already had to sweeten the offer. Before an independent committee approved the deal now on the table, the Dolans unsuccessfully offered $27 per share in October 2007, bumping it to $30 per share in January 2007
Shareholders and analysts have suggested that Cablevision is worth much more than $36.26 per share. (See Cablevision Bid Faces Shareholder Opposition .)
Some of the most significant opposition has come from ClearBridge Advisors, Cablevision's largest institutional shareholder, with 31 million shares and a 13.6 percent stake, which said in a statement today that it will oppose the offer.
ClearBridge "does not feel that the shareholders are being adequately compensated for the expected growth in Cablevision's free cash flow," the statement reads.
Cablevision could see a substantial increase in free cashflow conversion as capital spending lowers, according to a proxy filed in late June. (See Stock Spike Threatens Cablevision Deal.)
In July, Sanford C. Bernstein & Co. Inc. analyst Craig Moffett noted that "in just four short years -- from 2008 through 2011 -- the Dolans would reap more than $30 in cumulative unlevered cash flow… for an investment of just $36.26 per share."
ClearBridge's decision to vote against the deal complicates matters for the Dolans and puts the deal in serious jeopardy, considering the already stated intentions of other Cablevision shareholders.
Last week, Mario Gabelli, who holds an 8.3 percent chunk of Cablevision via Gamco Investors Inc., came out against the deal. ISS Governance Service, a firm that handles proxy voting, also has advised clients to vote against the privatization bid.
Multichannel News reports that two other institutional Cablevision shareholders -- Marathon Partners, with a 5.3 percent piece, and T. Rowe Price, which owns 5.4 percent of the MSO -- will oppose the transaction.
According to a Securities and Exchange Commission (SEC) document filed Oct. 5, the deal requires the blessing of the "majority of the minority" of Cablevision's class A stock holders.
Only 22 percent of remaining Cablevision shareholders need to vote "no" to block the transaction, Citigroup analyst Jason Bazinet said in a research note.
— Jeff Baumgartner, Site Editor, Cable Digital News
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