The Dolan family is making another offer to buy out public shareholders of Cablevision Systems Corp., more than a year after their last attempt failed due to objections from board members. The new deal values the cable TV operator at $7.9 billion plus the assumption of $11.3 billion in debt
Under the terms of the new offer, which the Dolans detailed in a letter to the Cablevision board on Sunday, the family would offer public shareholders $27 per share in cash, a 12.8 percent premium to the stock’s closing value on Friday. The Dolans control the company through a special class of stock.
The news sent Cablevision’s shares soaring $2.57, or 10.74 percent, to close at $26.50 Monday on the New York Stock Exchange.
The Dolans said they were interested only in doing the going-private transaction, dampening hopes that the company could be put in play as an acquisition target. They also said they would go ahead with the proposal only if it is approved by a special committee of independent directors.
The Dolans are in a position to block any potential sale to other bidders since they control 74 percent of the company’s vote. They also have a 22.5 percent economic stake in Cablevision.
If the deal goes through, the current management would stay in place, including Cablevision’s founder and chairman, Charles F. Dolan, and his son, James L. Dolan, who is CEO.
The Dolans said in a letter to the board that “succeeding in this fiercely competitive environment requires a long-term, entrepreneurial management perspective that is not constrained by the public markets’ constant focus on short-term results.”
Last time around, the Dolans’ bid to go private ran into opposition from board members, partly because of its complexity. That deal would have resulted in the cable TV business going private at the same time that a separate public company was created to hold several cable networks, Madison Square Garden, Radio City Music Hall, the New York Knicks basketball team and the New York Rangers hockey team.
Disagreements from board members over valuations led the Dolans to drop their earlier bid. Under the new offer, the Dolans would take the entire company private.
However, the valuation of the non-cable assets could again prove “nettlesome,” Sanford C. Bernstein analyst Craig Moffett said in a note to investors. He also said it was likely that it was “reasonable to expect that the independent directors will require a somewhat sweetened deal.”
A spokesman for the Bethpage, N.Y.-based company declined to comment.
The deal would require the Dolans to assume significant new debt to finance the deal, putting a greater strain on the company’s finances. Late Monday Moody’s Investors Service said it was putting all of Cablevision’s debt on review for a downgrade, saying the company’s credit indicators would “deteriorate meaningfully” as a result of the transaction.
Cablevision is seen as having enviably located assets in the New York area that are also extremely well-run. It has led the industry in adding premium offerings such as telephone service and high-speed Internet access, which not only bring in new revenues but also help stave off competition from satellite TV.
However, the company is also seen as having mercurial management. Cablevision surprised investors with a last-minute bid for the assets of bankrupt cable operator Adelphia Communications Corp., and it was also riven by a feud between Charles and James Dolan over the fate of a high-definition satellite TV venture, though those differences now appear to be patched up.
Cablevision suffered a blow this summer when it became one of several companies to come under federal investigation for its stock options practices. It also came to light that Cablevision had granted options to an executive after he died and changed the date on them to make it appear he received them while he was alive.
Several other companies have also gone private recently amid a continued willingness on Wall Street to underwrite such transactions with debt. In August, Aramark Corp., the nation’s largest food-service company, agreed to be acquired by a group led by its longtime CEO for $6.3 billion plus the assumption of about $2 billion in debt.
Cable television stocks have fared well in recent months as their “triple play” offering of video, phone and Internet service has proven to be a winner with customers. Meanwhile, satellite broadcasters have been unable to offer high-speed Internet and phone companies have had a tough time challenging cable’s core video business.
The Dolan family will finance the deal by investing all of its Cablevision shares, valued at about $1.7 billion based on the offer price, and through debt financing. The family said it has received a commitment letter for financing from Merrill Lynch & Co. and Bear, Stearns & Co. Inc.
Late Monday Cablevision said in a statement that it had named two of its board members, Thomas V. Reifenheiser and John R. Ryan, a retired vice admiral in the U.S. Navy, to a special committee that would evaluate the Dolans’ proposal.
