Dolans Continue Fight Over Voom3/01/2005 12:37 AM Eastern
Cablevision Systems Corp. chairman Charles Dolan’s apparent feud with son James over the fate of struggling HD direct-broadcast satellite venture Rainbow DBS is far from over after the two issued dueling press releases late Monday night concerning the fate of the service.
Charles Dolan and his son, Thomas (Cablevision’s chief information officer), had planned to buy the remaining assets of the service, marketed as Voom, and they had until Monday to reach a definitive agreement.
But late Monday night, Cablevision, led by CEO James Dolan, issued a terse press release stating that it had ceased negotiations with Charles Dolan and that it would shut the service down in 30 days.
Not to be outdone, Voom issued its own statement, saying that it intended to continue service “supported by the family interests of Charles and Thomas Dolan.”
“We are more than ever convinced of the viability of the Voom service,” Thomas Dolan said in a press release. “We believe our offer to Cablevision is in the best interests of Cablevision's shareholders and Voom’s 46,000 subscribers across the nation. If we are able to complete negotiations with Cablevision, we are certain that Voom HD will emerge as a robust new vendor providing a valuable alternative to the two services that now dominate the satellite industry.”
Analysts have speculated that Charles Dolan would sell or at least monetize part of his stake in Cablevision to fund Voom, which lost $600 million last year and which would need $1 billion-$1.5 billion in funding over the next several years.
With the latest developments, most observers believe a sale of Charles Dolan’s’ Cablevision stake is less imminent because he wouldn’t need the cash to fund the satellite service.
The rift between the Dolans came to light late last year after James Dolan apparently won a boardroom battle with his father, siding with Cablevision’s board of directors to pull the plug on Voom’s funding. Earlier, Cablevision had agreed to sell Voom’s satellite assets to EchoStar Communications Corp. for $200 million. That deal has not been affected.
Charles and Thomas Dolan had issued a letter of intent to purchase the remaining Voom assets. Terms of the letter were not disclosed, but most observers believed the Dolans would merely assume Voom’s liabilities and funding requirements.
Fulcrum Global Partners LLC analyst Richard Greenfield wrote in a research report that the decision to break off negotiations was odd.
“Our guess is that the board had heard enough about Voom and, despite the near-term costs of shutting down Voom, the saga (and its associated “money pit”) had dragged on long enough,” Greenfield wrote. “However, if Chuck and Tom Dolan were really prepared to buy Voom, we are very surprised that the board did not accept their proposal, as it would have removed liabilities that Cablevision will now have to fund. Even if their proposal required another few days to be completed, why not wait to prevent Cablevision shareholders from bearing the Voom shutdown costs?”
Greenfield added that the most recent developments might signal an irreparable rift in the relationship between Charles Dolan and his son, James.
“Regardless of the fate of Voom, we wonder whether irreparable harm has been done to Dolan family business relations,” Greenfield wrote. “With Jim Dolan and the board overruling Jim’s father (Chuck Dolan) and brother (Tom Dolan), we believe the potential for a sale of Cablevision is becoming ever more probable.”
Cablevision stock -- which had hit new three-year highs in the past week due to speculation that a sale was imminent -- lost ground early Tuesday, down $1.01 each to $30.05 per share in morning trading.