Cablevision

The inevitable happened July 30 as Cablevision Corp. (NYSE:CVC) announced its board gave the green light to its management to pursue a spinoff of its Madison Square Garden assets.

But the move was hardly a surprise, as Cablevision noted in a May earning release that it was exploring a Madison Square Garden spinoff.

After talking about weighing its strategic options for most of 2008, Cablevision also during a conference call on its first-quarter earnings May 7 reiterated its commitment of considering spinning off the unit.

Meanwhile, Harbinger Capital Partners, the hedge fund that began buying up Cablevision stock last year and in many eyes prompted the company's newfound openness with shareholders, sold shares in the company, dropping its stake from 9.1% to 7.5% in December and January.

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2008 HIGHLIGHTS

Cablevision has been analyzing a divestiture since the late summer and early fall 2009. Nearly six weeks after Cablevision Systems confirmed it was weighing strategic options, they apparently don't include another attempt by the Dolan family, with a controlling stake in the cable company, to take it private. At least not right now, according to a Reuters item Sept. 18.

Charles and James Dolan have repeatedly tried to stage a buyout of the company and while James Dolan said he wouldn't "completely rule it out" it's not really on [their] radar" right now, Reuters reported. Further, the news service noted that given the credit markets, asset sales in the near future may be hard to stage.

Meanwhile, the company is also taking a break from larger M&A deals, according to a Wall Street Journal report Aug. 14. The news came out of a roadshow with investors, a new, shareholder-friendly tack Cablevision staged to discuss its plans to weigh strategic options. The Deal's Richard Morgan examined just what was behind the company's "charm offensive," possibly activist hedge fund Harbinger Capital Partners, which had amassed a 4.9% stake at the time and grew to more than 9%.

Cablevision had said it wants to bring its operating performance more in line with its share price. On the divestiture front, the company could sell off its Rainbow Media Holdings LLC. Pali Research analyst Rich Greenfield wrote recently that books are already circulating. The subsidiary includes AMC, We.tv, IFC and the Sundance Channel, which Cablevision added to its lineup through a $496 million deal closed in June with sellers General Electric Co.'s NBC Universal, CBS Corp.'s Showtime Networks and the channel's founder Robert Redford. Regardless of its ultimate course chosen, Dealscape's Matt Wurtzel wondered who its banker could be, since it was former Bear Stearns Cos. CEO Alan Schwartz and he plans to leave Bear's new parent J.P. Morgan.

2008 ADDITIONS

The Sundance deal, which wrapped up a four-month auction, came May 7 as Cablevision's $650 million offer for Tribune Co.'s Long Island, N.Y. newspaper Newsday, came in as the winner. Days later, Cablevision won Newsday, defeating a $580 million bid by News Corp.'s Rupert Murdoch.

Meanwhile, Cablevision was up against Murdoch, as well as New York Daily News owner Mort Zuckerman in a bid for Newsday. Cablevision was reported to be in the running for the Long Island paper in March, which was followed by a report as not interested in April, and then it officially emerged as a bidder May 5.

According to several reports April 22, Tribune's Zell was said to be near a deal with Murdoch. Newsday reported April 29 that Cablevision could be working on a bid for the paper and potentially teaming with New York Observer's Jared Kushner. Talk of Kushner's involvement would fade.

A March 21 New York Times article pointing out Cablevision's interest was followed by a report from Richard Greenfield, a research analyst at Pali Capital Inc., who also felt a deal for Newsday by Cablevision was a possibility. "We increasingly believe a meaningful portion of CVC's free cash flow over the next couple of years appears to be headed for a series of noncore acquisitions," the analyst noted. Cablevision, Reuters reported subsequently, wasn't interested, but after Charles and James Dolan tried and failed repeatedly to stage a management-led buyout of their company, looking for external deals seemed a distinct possibility.

MOVING ON AFTER REJECTION

The Dolan family failed in October 2007 pursuing a management-led buyout of the company for the second time. The latest bid, a $22 billion offer, was put before a shareholder vote Oct. 24, despite key investors coming out in opposition ahead of the meeting.

Legg Mason Inc.'s ClearBridge Advisors joined the dissident cry Oct. 17. The cabler's largest shareholder said it would vote against the $36.26 per share deal, saying it undervalues the company, just days after Mario Gabelli's Gamco Investors Inc. came out against it and RiskMetrics Group's Institutional Shareholder Services Inc. recommended shareholders vote against the buyout. T. Rowe Price Group Inc. was also said to be in opposition to the deal.

The opposition didn't come as too much of a surprise. Some analysts have valued the company's stock at as much as $50 per share. The company announced the buyout May 2, nearly four months after its last offer was rejected.

The Dolans [were] in it for the cash, The Wall Street Journal said in May, as substantial investment used to launch new products like high-speed Internet is nearing its end and "the decline in its capital spending has turned Cablevision into a cash-generating machine capable of throwing off hundreds of millions of dollars a year."

On Jan. 16, the family was again rebuffed in its bid for the company, days after launching its third take-private offer proposal worth $8.9 billion. In a letter to the father and son team, a committee comprised of independent directors called the offer "inadequate."

On Jan. 12, the Dolans boosted their offer from $27 to $30 a share, offering about $8.9 billion for the portion they don't already own.

The news came about three months after the Dolans launched their second take-private offer for the company, which sent Cablevision shares soaring and ultimately led to the sweetened bid.

Charles and James Dolan, the chairman and chief executive, respectively, of the Bethpage, N.Y.-based cabler, said then that they would pay $27 a share, or about $6.3 billion, for the target's shares they did not own, an offer they said was 14.9% above the consideration they first put forth in June 2005, and one that valued the company's debt and equity at $19.2 billion.

READING BETWEEN THE LINES

In 2005, the Dolans launched a $33.50 a share bid for the company, including $21 in cash for Cablevision's cable business and a share of Rainbow Media Holdings, a collection of entertainment assets that they planned to spin off into a separate company. The bid implied a valuation of $12.50 per share for Rainbow Media -- which owns Madison Square Garden, the Independent Film Channel and other networks, the New York Knicks basketball team and the New York Rangers hockey team.

• The Dolans then withdrew the offer in October 2005, after failing to secure a deal with a two-person special committee the Cablevision board had appointed.
• The company then offered shareholders a $3 billion special dividend, which came to about $10 a share that was paid out in April. At the time, some analysts told The Deal it could be a ploy to make it a more attractive takeover target. Time Warner Inc. has an interest in buying the cable assets, says The Wall Street Journal, but that the company has in the past denied it is for sale to those on the outside.

The next offer, disclosed in October 2006, was simpler in structure and offered a higher premium to shareholders, as Dow Jones pointed out, but at a 13% premium to the stock's closing share price a day earlier, it left room for improvement.

The buyout may have put the company's other assets in play as well. In November, Cablevision fielded and rejected a $700 million offer for the Knicks and the Rangers from an investment group led by financier and former Icahn Associates exec Russell Glass, which it dismissed as lacking credibility. At the time, an analyst told The Deal the pair of teams and their home arena, Madison Square Garden, would more likely fetch at least $1 billion.

LEGAL WOES

The company weathered some legal trouble when it tried to withdraw the dividend offer, and later with stock-options-backdating issues.

• According to a Wall Street Journal report citing SEC filings, Cablevision awarded stock options to a vice chairman after he had died, but backdated them, and awarded options to a consultant but accounted for them as if he was an employee. The cabler backdated options between 1997 and 2002. Two Cablevision directors resigned in connection with the backdating scandal. 

Dealwatch executive summary
The Date	The Action
05.07.09	Cablevision's board authorizes management to spinoff Madison Square Garden assets
02.05.09	Harbinger Capital sold shares in the company, dropping its stake from 9.1% to 7.5% in December and January.
8.2008 8.2008 5.12.08 5.07.08 4.29.08 4.22.08	Harbinger ups its Cablevision stake. Cablevision weighs strategic options. Cablevision wins Newsday. Cablevision nets Sundance. Is Cablevision working on a spoiler bid for Newsday? Zell, Murdoch are reportedly near a deal for Newsday.
3.21.08	Cablevision is reportedly interested in Newsday. Later, Reuters indicates otherwise.
10.24.07	Cablevision shareholders reject management-led buyout.
10.17.07	Cablevision's largest shareholder comes out against the deal.
10.15.07	Cablevision shareholder expresses opposition.
5.2007	Valuating Cablevision.
5.01.07	Dolans reportedly near $22 billion deal for Cablevision.
1.16.07	Dolans are rejected.
1.12.07	Dolans better their last offer, raising it to $30 a share.
10.08.06	Dolans launch second take-private offer for Cablevision.
11.2005	Cablevision won't sell the Knicks and the Rangers.
10.25.06	Dolans withdraw their first take-private offer, suggest a dividend instead.
6.20.05	Dolans launch first take-private attempt for Cablevision.
Source: The Deal

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