From Bloomberg.com, By Christopher Stern and Michael White

Cablevision Systems Corp. agreed to be taken private by the Dolan family in a $10.6 billion transaction, ending a two-year effort by the cable-television provider's founders to win full ownership of the company.

The Dolans will pay $36.26 a share for the Bethpage, New York-based company, compared with a $30 bid rejected in January. The offer is an 11 percent premium to yesterday's close.

A deal would cap a campaign by Chairman Charles Dolan and his son, Chief Executive Officer James Dolan, who had offered to buy the company in 2005. Cablevision hands the family cable systems throughout New York state, ownership of Madison Square Garden, the New York Knicks basketball team and the New York Rangers hockey team.

The offer ``is a good number,'' said Andrew Baker, an analyst at Cathay Financial in New York. ``It probably puts it at a premium to its peers,'' including Comcast Corp. and Time Warner Cable Inc., the two largest U.S. cable companies.

Shares of Cablevision rose $2.55, or 7.8 percent, to $35.22 at 9:56 a.m. New York Stock Exchange composite trading. They climbed 15 percent this year before today.

The transaction, following ``extensive'' negotiations, is conditioned on approval by a majority of Class A shares that aren't owned by the Dolan family, Cablevision said today in a statement.

Including debt, the deal is valued at about $22 billion, the company said. Cablevision had long-term debt of $11.8 billion at the end of 2006.

Improving Outlook

The Dolans increased their offer because the cable television industry has improved, Baker said. Comcast today forecast cable-television revenue would grow more than analysts' estimates through 2009. Time Warner Cable Inc. today reported profit rose 16 percent as subscribers rose more than analysts' estimated.

In January, ``the board probably would have accepted $32 or $33,'' said Baker, who rates the shares ``neutral'' and doesn't own them. ``They could have said, `We've gotten good value for our shareholders.'''

The Dolans made an attempt to buy the company in October 2006 for $27 a share. They added $3 before a board panel rejected it in January, saying the sweetened offer of $8.9 billion offer didn't represent ``fair value.''

Previous Attempt

A two-director committee consisting of Thomas V. Reifenheiser and John R. Ryan had given general guidance to the Dolans on price, and also discussed various alternatives including debt, partnerships and asset sales.

Shareholders have endured corporate wrangling including a boardroom coup engineered by Charles Dolan, 80, in March 2005 to stop the company from shutting down the Voom satellite service.

Dolan, who owns a majority of Cablevision's Class B shares, installed executives including Liberty Media Corp. Chairman John Malone and former Viacom Inc. Chief Executive Frank Biondi on the board to stop the shutdown.

A month later Dolan gave in and agreed to close down the service, which had cost the company $1.4 billion, based on estimates at the time from Merrill Lynch & Co.

Cablevision has also been caught up in the scandal over backdated stock option grants. Last year, the company restated results back to 1997 and disclosed it had awarded backdated options to a dead executive.

Rising Sales

Like larger rivals Comcast and Time Warner Cable, Cablevision has increased revenue with packages of telephone, Internet and basic cable services.

Fourth-quarter sales rose 13 percent and profit from continuing operations fell 89 percent to $6.53 million on interest costs after the company took on debt to fund a $3 billion special dividend in April 2006. Profit excludes a court- ordered payment to Loral Space & Communications Inc., after Cablevision lost a legal dispute, Cablevision said in February.

Almost one-third of Cablevision's 3.3 million basic cable customers also subscribe to telephone service, the company said in February. The company forecast slowing customer growth this year as competition increases from Verizon Communications Inc.

Cablevision said on April 30 it agreed to sell its stakes in regional FSN sports networks in California and New England to Philadelphia-based Comcast for $570 million in cash.

Consolidation

A sale would be the third among top-10 U.S. cable companies in the past three years. Cox Enterprises Inc., controlled by the family of James Cox Kennedy, bought the public shares Cox Communications Inc., the fourth-largest cable operator, in 2004 for $8.5 billion.

In July 2006, Comcast and Stamford, Connecticut-based Time Warner Cable bought Adelphia Communications Corp. out of bankruptcy for $17.6 billion.

All this means is that New Yorkers who choose not to use Cablevision (or have no access to it) will suffer further, and the HD feeds of the teams the Dolans control will never be seen on satellite.

SMK

I will be very surprised if TWC doesn't make an offer prior to the end of this week. If they could, Comcast might, but they cannot because they're too close to the 30% ownership rule.

Other Cablevision Shareholders Balk at Dolans’ Bid
Gamco Investors’ Gabelli, S. Muoio Principal Among Those Opposed to Transaction
By Mike Farrell Multichannel News 5/2/2007

The Dolan family’s $10.5 billion bid to take Cablevision Systems private passed muster with a special committee of its board of directors, but it may not fly with shareholders not affiliated with the family.

The Dolans -- led by Cablevision founder and chairman Charles Dolan and his son, CEO James Dolan -- said Wednesday that their offer for the remaining shares of Cablevision stock they do not own was accepted by a special transaction committee of independent directors.

The deal still has to be approved by a “majority of the minority” of shareholders not affiliated with the Dolan family, and it also must pass regulatory muster.

Gamco Investors chairman Mario Gabelli, whose company owns about 8.5% of Cablevision’s outstanding stock, wouldn’t say which way he would vote, but he added that it seems that the Dolan family is getting the better end of the deal.

In an interview, Gabelli said that at $21.5 billion, the Dolans are valuing Cablevision at 10.5 times-11 times 2007 cash-flow valuation -- a low mark in his view considering the other assets in the mix, including Rainbow Media Holdings and Madison Square Garden.

“We think we’ve got $4.5 billion of value,” Gabelli said. “You are entitled as entrepreneurs to a piece of that. And I’m not opposed to giving a couple of billion [dollars], but I’m not so sure I want to vote in favor of $4.5 billion.”

Salvatore Muoio, principal and chief investment officer of S. Muoio, a New York-based securities-advisory firm that owns Cablevision shares, echoed Gabelli’s comments.

“It’s not a lay-up that you vote for it, from my perspective,” Muoio said.

Muoio was most concerned about the lack of a public stub in the deal -- a portion of the company that would remain public to allow current investors to participate in a future sale of the cable assets. The way the deal stands now, the Dolans would reap a large portion of the proceeds from a future sale of the cable company after the privatization deal is closed.

“I’m not so certain this does pass the majority of the minority test,” Muoio added. “Speaking for my clients, it would be great to have a participation in this company going forward. It’s a great business, it’s got a long way to go, you’re just entering a phase where free cash [flow] is going to start to get a lot larger. You want to participate in that. You want to participate in the sale to Time Warner. It’s going to happen.”

Time Warner has long lusted after Cablevision’s New York-centric assets and a going-private transaction could be a way to do a deal in the not-too-distant future. Time Warner -- which spun off its Time Warner Cable unit as a separate public company earlier this year -- could also use that stock as a deal currency. However, a Time Warner buy would have to wait at least until next year in order to avoid a big tax hit.

Nevertheless, on a conference call with analysts to discuss its first-quarter results, Time Warner chairman Richard Parsons said Cablevision would be an attractive asset.

“Our position going back for years on Cablevision is if the Dolans ever were to decide to part with that asset, we would certainly want to be on their list of people to talk to,” Parsons said.

http://www.multichannel.com/index.asp?layout=articlePrint&articleID=CA6438732

I will be very surprised if TWC doesn't make an offer prior to the end of this week. If they could, Comcast might, but they cannot because they're too close to the 30% ownership rule.

what exactly is the 30% ownership rule about.

what exactly is the 30% ownership rule about.
It was a proposed rule that would limit a company from controlling more than 30% of the country's cable TV. I don't think it became an actual rule though.

It was a proposed rule that would limit a company from controlling more than 30% of the country's cable TV. I don't think it became an actual rule though.

thanks, I don't think it should be a problem in a couple of years.

I think cable companies, telcos & satellite will continue to merge and be available to the entire country.

Imagine COMCAST, DIRECTV & VERIZON being the only option for the entire country. Not that bad, some people only have one option.

Cablevision Deal Remains Very Much Up in the Air
By MICHAEL J. DE LA MERCED and ANDREW ROSS SORKIN The New York Times May 3, 2007

At the Cablevision Systems annual board meeting in Palm Beach, Fla., in March, the company’s founding Dolan family held a private meeting with the board’s special committee — the two men who had rejected previous buyout offers from the family.

The Dolans wanted to make a fourth bid for the company, which they had founded in 1973. But before they pressed ahead, they wanted several assurances from the special committee, which at times has had an antagonistic relationship with the family.

Unlike previous offers, which were made public, the Dolans wanted to reach a deal privately with the board to avoid the embarrassment of another public rejection. And the family wanted to know what price it would finally take to win them over.

The two board members, Thomas V. Reifenheiser and John R. Ryan, turned to Lehman Brothers and Morgan Stanley, the board’s longtime advisers, which had urged the committee members to reject the Dolans’ previous offers.

What emerged was this week’s $10.6 billion offer, and this time Cablevision accepted. But the deal is far from assured.

In what is known as a “majority of the minority” requirement, the deal is subject to approval of more than half of shareholders, excluding the Dolans and the company’s directors and officers.

And analysts and investors are still concerned that the Dolans may be offering too little for Cablevision. Should the transaction be approved, the family could then sell the company — the most likely potential buyer is Time Warner Cable — and pocket billions of dollars.

“Four months ago, the Dolans said their offer was best and final,” Richard Greenfield, an analyst with Pali Research, said. “Less than four months later they’re miraculously able to come up with a more than 20 percent increase in their bid.”

The Dolans’ effort to take Cablevision private has been among the most scrutinized deal-making efforts, as investors have increasingly complained that management-led buyouts are winning companies on the cheap.

So far, it seems that the Dolans have resolved their impasse with the Cablevision board. Under the terms of yesterday’s deal, the Dolans would pay $36.26 a share for the company, an 11 percent premium to its closing price of $32.67 on Tuesday and 21 percent higher than the $30-a-share offer the family proposed in January.

The Dolans would contribute their own shares, valued at $2.1 billion, to a newly private Cablevision, and the company would take on $15.5 billion in debt to finance the deal. Merrill Lynch, Bear Stearns and Bank of America would provide the financing.

The company, based in Bethpage, N.Y., has been under the effective control of the Dolans for years. Though the family holds only a 20 percent equity stake, it has 70.4 percent of the company’s voting power.

But if the deal goes through, the Dolans, led by the company founder, Charles F. Dolan, and a son, James L. Dolan, may finally win complete control of one of the cable industry’s cash cows, which serves 3.1 million subscribers in the New York metropolitan area. Through its MSG Networks unit, Cablevision also owns Madison Square Garden and Radio City Music Hall, as well as the New York Knicks and the New York Rangers.

Cablevision’s geographical footprint is far smaller than those of rivals like Comcast and Time Warner Cable. Yet its subscribers are among the wealthiest in the industry, with many living in affluent suburbs on Long Island and New York’s Westchester and Rockland Counties.

What has long frustrated shareholders is the large amount of capital that companies like Cablevision and Time Warner Cable have spent fending off rivals in the telephone industry, like Verizon and AT&T. Cablevision has spent heavily to build out its so-called triple-play offerings, which include cable programming, telephone services and high-speed Internet access.

The company has been seen as especially vulnerable, because its geographical footprint lies entirely within that of Verizon, which is building a fiber-optic network to compete with cable.

Craig Moffett, an analyst with Sanford C. Bernstein & Company, said that Verizon had extended that service through about 18 percent of Cablevision’s service area.

But many analysts say that Cablevision started early in promoting its additional services, and has already started turning its capital spending into profits.

“Their free cash flow growth rates are eye-popping,” Mr. Moffett said.

That promise of profitability, however, has made Cablevision a highly visible takeover target. Chief among potential suitors is Time Warner, which has been interested in the company since the 1980s. Time Warner Cable is dominant in the New York City cable market, which would neatly mesh with Cablevision’s markets.

When asked in a conference call yesterday about the possibility of buying Cablevision, Time Warner’s chief executive, Richard D. Parsons, said: “You know, our position going a whole way back for years on Cablevision is, if the Dolans ever were to decide to part with that asset we would certainly want to be on their list of people to talk to.”

http://www.nytimes.com/2007/05/03/business/03cable.html?ei=5089&en=7678c8be4e44a169&ex=1335844800&adxnnl=0&partner=rssyahoo&emc=rss&adxnnlx=1178187387-Jux9hyXLfDovpnDhOc5t/Q&pagewanted=print

Imagine COMCAST, DIRECTV & VERIZON being the only option for the entire country. Not that bad, some people only have one option.

If we only had three SERVICE PROVIDERS, that might not be bad, and would hopefully foster some competition if they were all available nationally.

The bigger problem as I see it is that 2 of those also own program content. Imagine having to have some level of service from all three in order to get the channels that you want. Comcast won't sell Comcast Sports Net to the other two, Liberty won't make Discovery channel et al available to Comcast, etc.

I'm leaning more and more towards content providers providing content, and service providers providing service, and not let them mingle in each other's business. Let me choose who offers me the best value for my needs, who can work the best legitimate deal with the content providers, and that's who I'll go with.