Dolan family reaches deal to take Cablevision private
May 2, 2007 at 7:24 AM
NEW YORK - Cablevision Systems Corp., a New York-area cable TV provider that also owns Madison Square Garden, said Wednesday it has agreed to be taken private by the Dolan family, the company's controlling shareholders, in a deal worth about $10.6 billion.
It was the Dolans' third attempt to take the company private in recent years, the first two having been rejected as inadequate by a two-person committee of independent directors on its board.
That committee, and the full board of directors, have approved the Dolans' latest offer of $36.26 per share, the company said in a statement.
Last fall the Dolans offered to take the company private at $27 per share in cash, and in January raised the offer to $30, but that offer too was deemed inadequate by the board committee.
Those directors had also rejected a more complex bid the Dolans made in 2005 to pay $21 in cash plus stock from a newly created public company containing Madison Square Garden and a group of cable channels.
The latest offer represents an 11 percent premium over Cablevision's closing price of $32.67 on Tuesday, before the deal was announced.
The Dolans, led by Charles Dolan, the chairman, and his son James, the CEO, control Cablevision through a special class of supervoting shares. The independent directors had to sign off on any going-private transaction in order to ensure that public shareholders got a fair deal. As one of the conditions of the deal announced Wednesday, the transaction must be approved by a majority of the holders of Cablevision's publicly traded stock that is not held by the Dolan family. Charles Dolan said in a statement that the company would be better able to compete in today's "increasingly competitive environment" as a privately held company. Like other cable companies, Cablevision faces competition for video customers from satellite broadcasters like DirecTV Group Inc. as well as phone companies such as Verizon Communications Inc., which are starting to offer video services. Two other major cable companies, Cox Communications Inc. and Insight Communications Co., have also gone private in recent years, frustrated with the low values of their shares in the public market. The earnings of many cable companies have taken hits in recent years as they invested in building up the digital capacity of their systems to better compete with service from satellite broadcasters. Now, led by Cablevision in particular, they have raised revenues and increased their ability to retain customers with "triple play" offerings of digital video, high-speed Internet and phone service. Craig Moffett, an industry analyst at Sanford C. Bernstein, said in a note to investors Wednesday that Cablevision was about two to three years ahead of its rivals in offering advanced services, and that the company stood to reap significant rewards as its investment costs decline in coming years. Cablevision has about 3 million cable TV customers, mainly in the New York area, and also owns Radio City Music Hall as well as Madison Square Garden and the professional teams that play there, the Knicks of the NBA and the Rangers of the NHL. The Dolans had previously characterized their January offer of $30 per share as their "final" proposal, but on Monday the company announced a deal to sell its stakes in two regional sports networks to cable industry leader Comcast Corp. for $570 million in cash. That will free up extra cash to reduce debt, easing up on the Dolan's burden for taking the company private. The company said it has secured $15.5 billion in new debt financing to complete the deal and refinance some bank debt. David Peterson, a credit analyst at Fitch Ratings in Chicago, said that the company's ability to generate cash did not put it in danger of becoming overloaded with debt. "Cablevision is one of the best operating companies in the industry, and the operations can certainly support a higher level of leverage," he said. AP-CS-05-02-07 1718EDT