Bid to take Cablevision private in trouble


NEW YORK -- A bid by the controlling shareholders of Cablevision Systems Corp. to take the cable TV company private next week ran into deeper trouble on Wednesday when the company's largest outside investor said it would vote against the $10.6 billion deal, saying it shortchanges shareholders.

The announcement from ClearBridge Advisors, which owns a 14% stake, signaled growing displeasure among institutional investors with the Dolans' offer to buy out public shareholders for $36.26 per share. Cablevision has 3 million cable TV subscribers in the New York area and also owns the AMC, WE and IFC cable channels, Madison Square Garden and the New York Knicks NBA team.

The Dolans have been trying to take the company private for several years, and Cablevision's board has rejected previous offers from them. Cablevision's CEO James Dolan said in a statement late Tuesday that his family wouldn't raise its bid and was prepared to continue running it as a public company if the going-private deal is turned down, a possibility that is seeming increasingly likely.

Prior to ClearBridge's announcement, the company's second-largest investor, a group of funds controlled by Mario Gabelli, said Friday it would vote its 8.3% stake against the deal. The No. 3 shareholder, the investment firm T. Rowe Price with 5.7%, has also said it's not happy with the proposal.

That leaves the Dolans' task of getting at least half of the Cablevision's outside shareholders to approve the deal increasingly difficult. Pali Capital analyst Richard Greenfield said in a note to investors Wednesday that with ClearBridge against the deal, there is "virtually no hope" for it to succeed.

Both Cablevision and the Dolans declined to comment on ClearBridge's announcement, but all indications remained that a special shareholder vote on the transaction would proceed as scheduled next Wednesday.

In some ways, the Dolans' bid has become a victim of Cablevision's own success. A highly regarded cable operator with customers in affluent areas, the company has also been a leader in introducing highly profitable new services such as high-speed Internet and digital phone service that runs over cable lines.

ClearBridge said in a statement that it "does not feel that the shareholders are being adequately compensated" by the Dolans' offer. Legg Mason Inc., which owns ClearBridge, declined to comment beyond the prepared statement.

ISS Governance Services, in its recommendation last Friday that shareholders vote against the deal, noted that estimates by Wall Street analysts put the value of the company well above the Dolans' offer of $36.26 per share -- HSBC seeing a price of $42.82, and Deutsche Bank with $50 a share.

Even though the Dolans own 65% of Cablevision's vote through a special class of shares, in order to assure fairness to outside shareholders the deal must be cleared by a majority of the non-family interests. Charles Dolan is the company's chairman and his son James is the chief executive.

If the Dolans' offer does fail, that would subject Cablevision's shares to the generally negative sentiment currently weighing down the shares of other cable companies such as Comcast Corp. and Time Warner Cable Inc.

Investors pushed Cablevision's shares down $1.14 or 3.4%, to $32.56 on Wednesday. The shares have traded in a 52-week range of $26.90 and $39.75.