Cablevision to buy Bresnan for $1.37 bil

Announces $500 million stock buyback program

NEW YORK -- Cablevision Systems has agreed to acquire privately held cable operator Bresnan Communications in a deal valued at $1.365 billion, the companies said Monday.

Bresnan, majority-owned by private equity firm Providence Equity Partners with cable giant Comcast Corp. holding a 30% stake, is the nation's thirteenth-largest cable company and is focused in Colorado, Montana, Wyoming and Utah. It serves more than 300,000 basic cable subscribers and has been on the block in an auction that reportedly also drew the interest of other cable and investment firms and John Malone via media services firm Ascent Media.

Cablevision owners the Dolan family had long-running ties with Bresnan founder and cable pioneer Bill Bresnan who died in November.

Amid market chatter about Cablevision's interest, some analysts have in recent days called on the company to buy back stock rather than buying Bresnan. The Dolans have been known to make acquisitions that are unpopular with investors, such as when it bought newspaper Newsday. Also, Cablevision has been focusing on its core New York market, but Bresnan will take it away from that.

However, in a nod to investors, Cablevision on Monday also announced a $500 million stock buyback program. Management furthermore highlighted future tax benefits thanks to the deal that will make up for part of what is seen as a fairly high price tag.

Also, the company is acquiring Bresnan with $1 billion in debt held by a new subsidiary and equity. This structure is seen as reducing the risk for Cablevision shareholders.

"The Bresnan team has built an impressive cable business that performs well financially, and we look forward to working to enhance those systems further," Cablevision president and CEO James Dolan said in explaining the rationale for the acquisition.

COO Tom Rutledge who will oversee the Bresnan properties added: "Bresnan is a well-managed company that has invested wisely in its operations and has pursued a strategy which is aligned and quite similar to Cablevision's."

Wall Street reacted mostly positively to the deal on Monday as Cablevision shares closed up 5%  at $24.57. Analysts highlighted a lack of telecom TV service competition in Bresnan's cable systems. Also, "there might be at least a couple years of lower programming rates currently being paid by Bresnan due to Comcast owning 30% of Bresnan," said Miller Tabak analyst David Joyce.

But most highlighted the high price premium that Cablevision is paying in the deal. "The (stock) repurchase program is a welcome development, though investors will be frustrated by the decision to buy Bresnan at (a price multiple of) 8.3x (on expected 2009 operating cash flow) instead of acquiring more of Cablevision itself for 6.3x," said Sanford C. Bernstein analyst Craig Moffett.