Cablevision advances MSG spinoff plan

Cablevision, Madison Square to be controlled by Dolans

NEW YORK -- Cablevision Systems said Thursday that its board has authorized management to move forward with a spinoff of the company's Madison Square Garden business to stockholders by year-end.

Under the plan, both Cablevision and the new MSG would be controlled by the Dolan family through their ownership of Class B shares. Cablevision also highlighted that it is "not considering the sale of MSG, any of MSG's businesses or any other Cablevision business at this time."

Some analysts had hoped that a spinoff of MSG would lead to some sort of sale. But Cablevision said Thursday that the spin will help it realize the full value of the underlying assets.

The spin would be structured as a tax-free pro rata spinoff to Cablevision's existing shareholders who would be allowed to own shares in both Cablevision and the new MSG.

After the spin, Cablevision president and CEO James Dolan would also become executive chairman of the new, publicly traded MSG.

Hank Ratner would be president and CEO, while continuing as Cablevision's vice chairman.

Said Dolan: "This spinoff will create two distinct companies, each with enhanced strategic flexibility, its own defined business focus and clear investment characteristics. The new MSG will be an attractive combination of sports, entertainment and programming properties, while Cablevision will continue to house a portfolio that includes industry- leading telecommunications services and popular programming networks."

Analysts expect a spinoff to create shareholder value. Collins Stewart analyst Thomas Eagan, for example, said a separation will "enable MSG to be valued separately, taking advantage of recent sports teams transactions, such as the sale of The Canadiens (for $550 million) and Cubs (for about $900 million), adding $2-$3 per share in value."

And Sanford C. Bernstein analyst Craig Moffett said: "The spinoff of MSG is a clear positive, albeit a less dramatic one than would have been the case if the Dolan family interests had been disaggregated and redistributed across the different asset pools." The core cable systems of Cablevision will "now, more than ever, be the centerpiece of what remains," which will make its free cash flow strength "even more eye-popping," he added.

Cablevision Thursday also reported a second-quarter profit of $87.0 million, down from $94.7 million in the year-ago period. Revenue rose 9.8% to $1.88 billion.
The company lost 8,700 basic cable subscribers, more than analysts had expected. Digital cable customer gains exceeded projections, but most other subscriber trends fell below estimates.
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