Board gives Dolans their privacy
Latest offer for Cablevision gets OK; stock jumps 9.9%After a couple of failed attempts in the past two years, the Dolan family has taken a big step toward taking private Cablevision Systems Corp., the cable operator that it controls, in a sweetened deal worth about $10.6 billion.
News of an agreement between the board and the Dolans boosted Cablevision shares to a 52-week high Wednesday. The stock rose 9.9% to $35.90, and the company led all gainers on The Hollywood Reporter's Showbiz 50 stock index.
The Dolans control a majority of Cablevision, but the company said a majority of other shareholders must also approve the proposed deal, even though it didn't immediately set a date. The transaction is subject to certain regulatory approvals.
Wall Street observers estimated Wednesday that it could take up to six months or so to close the deal.
After overnight market chatter, Cablevision confirmed that it had reached a definitive sale agreement with an entity created by the Dolans for $36.26 per share in cash. The transaction implies an enterprise value of about $22 billion, according to Cablevision.
The agreement is a result of what the company said were "extensive negotiations" between the Dolans and a special transaction committee of independent directors of Cablevision, which had rejected previous buyout offers.
Based on the recommendation of the committee, Cablevision's board already has approved the transaction, the company said.
The buyout price of $36.26 per share represents a 34% premium to the Dolans' $27 a share offer from October, a 21% premium to its $30 per share offer from January and more than a 50% premium to Cablevision's closing price before the original October bid.
Some institutional investors, like Mario Gabelli, have argued that Cablevision is worth closer to $40 per share and are expected to continue pushing for a higher price tag, Wall Street sources said.
Most Wall Street observers believe that a majority of shareholders will go for the deal. "I'm weighted in that direction," Miller Tabak + Co. analyst David Joyce said.
Said chairman Charles Dolan and son and CEO James Dolan: "This new structure and an entrepreneurial perspective will enable us to keep growing the business with our talented management team and dedicated employees."
In the proposed transaction, the Dolans will contribute about $2.1 billion in equity through a reinvestment of their Cablevision shares in the new privately held company. Investment banks have committed to provide about $15.5 billion in debt financing to fund the deal.
The buyout news again created buzz that the Dolans could down the line sell Cablevision's cable systems to Time Warner Cable.
During parent company Time Warner Inc.'s earnings call on Wednesday, an analyst asked TW chairman and CEO Richard Parsons about Cablevision. "The family is buying, not selling," he replied. "But if the Dolans were to sell off their cable systems, we'd certainly want to be on their list of people to talk to."
Bethpage, N.Y.-based Cablevision also owns the New York Rangers and New York Knicks sports teams, Madison Square Garden, Radio City Music Hall and cable networks AMC and the Independent Film Channel.