Cablevision-Newsday Union Would Raise Regulatory Concerns: Moffett

Bernstein Analyst Says LI Dominance Would Draw FCC, Congressional Scrutiny

By Mike Reynolds -- Multichannel News, 5/5/2008 12:37:00 PM

Should Cablevision Systems Corp. succeed in its quest to acquire Long Island newspaper Newsday the deal could come under regulatory scrutiny, according to Sanford C. Bernstein & Co. vice president and senior analyst Craig Moffett.

Moffett, in a note released Monday morning, wrote that if Cablevision’s $620 million bid -- currently above the $580 million offered by both Rupert Murdoch’s News Corp., which owns the New York Post and real estate mogul Mort Zuckerman, owner of the Daily News -- wins, it would not be “a regulatory slam dunk.”

Moffett points out that while much has been written about anti-trust concerns raised by a Murdoch acquisition of Newsday (News Corp. already runs the Post under an exemption that would ban Murdoch’s because he controls the Fox affiliate in the New York market), Cablevision’s gambit does not cut across similar newspaper/broadcast prohibitions.

Nevertheless, Moffett believes a Cablevision/Newsday union would attract scrutiny from the Federal Communications Commission and Congress.

“As the primary distributor of television content on Long Island via its dominant position as a cable operator, and as the sole ‘publisher; of TV news on Long Island through its ownership of News Channel 12, a Cablevision bid would be just as problematic as a News Corp deal,” Moffett wrote.

Overall, Moffett, who rates Cablevision’s stock as “outperform,” with a $45 per-share target, does not favor a combo with Long Island’s leading newspaper.

“Our recommendation of Cablevision shares rests on the prodigious free cash flow generation prospects of the Cablevision business, and - explicitly - on the return of that cash to shareholders,” he wrote. “It does not presume diversification into a failing industry.”

Cablevision's bid, according to published reports, includes Newsday's real estate. However, owner Tribune Co. has indicated it does not want to sell Newsday 's real estate portfolio on Long Island, which has reportedly been valued at $30 million to $40 million, making all three bids “approximately comparable,” said Moffett.

Cablevision previously has declined to comment on its interest in Newsday.