Cablevision Systems’ long-awaited plan to spin off its AMC
Networks programming unit moved closer to reality last week, after Cablevision’s directors
approved the split and set a June 30 date for the distribution of new shares to current
stakeholders.
Cablevision announced in December that it intended to spin off its programming unit,
Rainbow Media Holdings, including popular cable networks AMC, WE TV, IFC, Sundance
Channel and IFC Films, as a separate entity. The new unit will be called AMC Networks.
After the split Cablevision will become more of a pure-play cable operator with about
3.3 million subscribers in the New York metropolitan area, Utah, Colorado, Wyoming
and Montana. Cablevision will also retain local-news channels News 12 Networks and
MSG Varsity, which focuses on local high-school sports.
VALUE PLAY
The split also should unlock the value of AMC, which many analysts and Cablevision itself
have said were not properly reflected in the overall value of the company.
BTIG media analyst Richard Greenfi eld estimated AMC could be priced as high as $12
per share, or about one-third of Cablevision’s current stock price.
Miller Tabak media analyst David Joyce was a bit more conservative, saying AMC could
be priced between $8.75 and $10.19 per share.
Both analysts agreed AMC was poised for continued growth. Greenfield estimated revenue
would rise 8.4% to $1.2 billion and cash flow would increase nearly
11% to $445.1 million in 2011. Joyce’s estimates were in the same ballpark
— 10% revenue growth to $1.2 billion and 13.6% cash flow growth
to $456 million.
Joyce said prospects of an
outright sale, something that
has followed AMC and its predecessor
Rainbow for a number
of years, should boost AMC
once it is fully separated from
Cablevision.
“For more than a decade,
the AMC Networks have been
fodder for takeover speculation,
and as a standalone entity
that discussion is not likely to
be quelled,” Joyce wrote in a research
note. “Therefore, we believe
the stock should react well
post-spin both for fundamental
growth and the sale possibility.”
Cablevision has already gotten
a lift from AMC: Shares rose
4.5% ($1.53) to $35.65 on June 7,
when it announced the board
approval.
“With today’s board action, we are one step closer to creating
two distinct companies for investors. Rainbow today houses some of cable
television’s most admired networks, while Cablevision’s portfolio of
industry-leading telecommunications services and local content offerings
has made it one of the nation’s leading media and telecommunications
companies,” Cablevision CEO James Dolan said in a statement.
He also will serve on the new AMC Networks’ board.
On the distribution date, Cablevision shareholders of record will receive
one share of AMC Networks for every four shares Cablevision
stock they own.
TOP EXECUTIVES
Following the spin-off , Cablevision founder Charles Dolan will become
executive chairman of AMC Networks and will continue as chairman
of Cablevision.
Post-split, Rainbow Media CEO Josh Sapan will be AMC Networks
president and CEO.
AMC Network’s Class-A common stock is expected to begin trading
on the NASDAQ Stock Exchange on a “when-issued” basis on June 16
under the symbol “AMCXV.” The shares will trade “regular way” under
the symbol “AMCX” on July 1.
With the spinoff , AMC Networks will incur approximately $2.43 billion
of new debt, consisting of $1.73 billion aggregate principal amount
of senior secured term loans and $700 million aggregate principal
amount of senior unsecured notes. Proceeds from the financing will
be used to repay all outstanding AMC Networks debt and approximately
$1.25 billion of Cablevision and/or CSC Holdings LLC debt.
