Cablevision accepts bid to go private

Founding family to pay $10.6 billion

May 03, 2007|By Bloomberg News

Cablevision Systems Corp., the cable-television provider that owns Madison Square Garden, agreed to be taken private by the founding Dolan family for $10.6 billion in cash, capping their two-year effort to buy the company.

The Dolans will pay $36.26 a share, the Bethpage, N.Y.- based company said yesterday in a statement. The offer is 11 percent more than yesterday's close and 21 percent above the family's $30 bid that was rejected in January.

The agreement hands the Dolans a cable network that gets 21 percent more revenue per customer than larger rival Comcast Corp., as well as ownership of the New York Knicks basketball and New York Rangers hockey teams. Going private also frees Chairman Charles Dolan and his son, Chief Executive Officer James Dolan, from public scrutiny of their stewardship and the demands of shareholders for faster profit growth.

"Holders could be relieved that they are receiving a decent return on investment and their exposure to the volatile `Dolan family discount' will likely be going away," New York- based Miller Tabak & Co. analyst David Joyce told clients in a research note yesterday.

Shares of Cablevision rose $3.23, or 9.9 percent, to $35.90 in New York Stock Exchange composite trading. They have climbed 26 percent this year.

The transaction, after "extensive" negotiations that included lawyers for shareholders, is conditioned on approval by a majority of Class A shares that aren't owned by the Dolan family, Cablevision said yesterday in the statement. Including debt, the deal is valued at about $22 billion, the company said.

The Dolans were turned down in at least two previous attempts to buy the company, first in 2005 and then an October 2006 bid for $27. A sweetened offer of $30 was rejected by a board panel consisting of Thomas V. Reifenheiser and John R. Ryan in January because it didn't represent "fair value."

The reason the Dolans want Cablevision may be the same reason some investors may not want to sell.

"We continue to believe that Cablevision, as an asset, is worth in the mid-$40s," John Linehan, who helps manage $10 billion including Cablevision shares at T. Rowe Price Group Inc. in Baltimore, said in an interview. "This bid is not reflective of the value of the company, and in the past it seems like other shareholders have agreed."

The price is "too low," said Mario Gabelli, chairman of Rye, N.Y.-based Gamco Investors Inc., Cablevision's second-largest outside investor with 8.5 percent of the Class A shares, in an interview. He said he hasn't decided how he will vote.

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