Cablevision Goes Private
The third time is apparently the charm for the Dolan family, which received board approval to take telecom giant and Madison Square Garden owner Cablevision private in a deal worth about $10.6 billion, the company announced May 2nd.
Cablevision chair Charles Dolan and his son, CEO James Dolan, made two previous bids for the company, which were rejected by the board as too low. The winning offer works out to $36.26 per share, well up from an initial offer in 2005 of $21 in cash plus stock from a newly created public company including MSG and a group of cable channels. The Dolans upped the ante to $27 per share last fall, and again in January to $30, which was still deemed too low by a board committee.
The Dolans own about 20 percent of Cablevision common stock but control some 70 percent of the voting power. However, independent directors had to sign off on any move to take the company private in order to ensure that public shareholders got a fair deal.
Two other major cable companies, Cox Communications and Insight Communications, have also gone private in recent years. The earnings of many cable companies have taken hits as they invested heavily in building up digital capacities and attempted to compete with satellite broadcasters.
Other telecoms, such as Verizon Communications, have also turned up the heat by offering bundled packages that include wireless phone, broadband Internet, and television services.
In addition to the cable franchise that services some 3 million customers, Cablevision owns Madison Square Garden, Radio City Music Hall, and New York sports teams including the basketball Knicks and hockey’s Rangers.
A group of shareholders who filed suit over the Dolan’s attempt to go private participated in the talks to bring about the fatter offer and agreed to drop pending litigation with the new bid, according to the Wall Street Journal.
It’s not clear how or if the transaction will affect MSG or Radio City, although Moody’s Investors Service and Standard & Poor’s said May 2nd that they may cut Cablevision’s ratings deeper into "junk" territory because of the deal, citing debt financing.
The possible downgrade "reflects the potential for a significant degredation of credit measures if the transaction were to be significantly debt-financed, with no sale of assets and accompanying debt paydown," S&P said.
A Cablevision spokeswoman told Pollstar the company’s policy is to not comment on speculation regarding possible transactions, adding that the sale of outstanding shares to the Dolans is tentative pending shareholder approval.
The deal will reportedly be paid for with $2.1 billion in equity through reinvestment of the Dolan’s Cablevision shares and $15.5 billion in debt financing, with the company’s existing debt remaining outstanding.