Ratings

Is Charter-TWC-Cablevision Deal Talk All Smoke, No Fire?

CableU.tv Reborn As RatingsIntel.com 7/07/2013 8:00 PM Eastern

Investors seem to be betting that the next target for industry consolidation may not necessarily involve Liberty Media chairman John Malone and Charter Communications, but rather a company that has been the subject of merger talk for years — Cablevision Systems.

Speculation has been hot and heavy since May — when Liberty invested $2.6 billion for a 27.3% stake in Charter — that Malone would use his new toy as an acquisitions vehicle. And the preferred target over the past several weeks — at least in several media reports — has been Time Warner Cable.

Last week, influential Bank of America Merrill Lynch media analyst Jessica Reif Cohen took another tack, mapping out in a detailed 20-page report that while much Wall Street sweat and toil has been expended on figuring out a TWC/ Charter merger, that effort would be better focused on a pairing of TWC and Bethpage, N.Y.-based Cablevision.

That same day, Wunderlich Securities media analyst Matt Harrigan issued a report that said Cablevision could be a target of Time Warner Cable or Charter, but more likely TWC.

When a Reuters report chimed in saying TWC could buy Cablevision and Cox to ward off Charter, Cablevision shares shot up 10% on July 1. The gains continued on July 2, with the stock up another 3% to $19.02. Since June 12, Cablevision stock has risen 35%, almost entirely on deal speculation.

Cablevision officials declined to comment on “rumor and speculation.”

Anyone who has followed the industry for any length of time knows that speculation around a potential pairing of Cablevision — which mainly serves the New York City suburbs — and TWC, whose New York-area footprint serves four of the city’s five boroughs, is almost as old as coax itself. But investors seem to believe that the time may finally be ripe for a deal.

In her report, Reif Cohen basically dismissed a TWC/ Charter merger, adding that while anything is possible, TWC would have to raise its debt leverage ratio to 5 times cash flow — solid junk bond territory — to make it work. TWC has said repeatedly that its 3.25 times leverage and investment grade rating are sacrosanct.

A Cablevision deal wouldn’t be cheap but would be doable — Reif Cohen assumed a $27-pershare takeout price (nearly double Cablevision’s price on June 12), which could be achieved with a small increase in leverage (to 4.25 times) and issuing about 32 million shares.

Harrigan estimated a $25 takeout price for Cablevision, either by TWC or Charter.

None of the analysts believe a Cablevision deal is imminent. And at least one doesn’t think it should happen. Pivotal Research Group principal and media and communications analyst Jeff Wlodarczak believes Cablevision is “over-penetrated and overpriced,” adding that while a transaction could ward off Charter’s advances, “that is a bad reason to do a deal.”

And though the Dolan family, led by chairman Chuck Dolan, has given no indication of a desire to sell, some people familiar with the company believe the timing is right for a transaction.

One mutual fund portfolio manager traced the difficulties back to Cablevision’s October 2010 retrans fight with Fox Broadcasting, which darkened the New York affiliate for the first two games of that year’s World Series. That was followed by chief operating officer Tom Rutledge’s departure in 2011 (he’s now Charter’s CEO), Verizon’s aggressive FiOS rollout and Superstorm Sandy.

“At some point, Chuck has to say, ‘I’m going to sell and maximize the value for the family,’ as opposed to waiting and letting the asset waste,” the portfolio manager said.

CableU.tv Reborn As RatingsIntel.com

TV-ratings research company CableU.tv, whose sister company CableReady filed for Chapter 11 bankruptcy protection earlier this month, unveiled an agreement with Nielsen that expands the research firm’s scope and mission .

CableU will relaunch as RatingsIntel on July 9, and will make available online all CableU research content at launch — a searchable archive of more than 4,000 ratings research reports written by the company’s analysts since 2006. RatingsIntel will move from monthly reports on 30 cable networks to publishing daily reports covering the most relevant ratings stories of the moment among all Nielsen-reported networks, including broadcasters.

In its Chapter 11 bankruptcy filing, Norwalk, Conn.- based CableReady cited industry consolidation, mergers and acquisitions of production companies, larger competitors, and the uncertain global economy.

“Our mission is simply stated: Put ratings into context for busy media professionals and those with a financial stake in the industry,” said current CableU partner Reess Kennedy, who will take over as CEO from CableU founder Gary Lico, who will stay on as an adviser and minority partner.

RatingsIntel will also support its daily reporting and analysis with tables containing Nielsen ratings data and will use new, interactive graphing technology to provide clarity to subscribers on the key aspects of the ratings stories written by the company’s analysts.

Kennedy also emphasized the importance of RatingsIntel being an independent company. “Our only obligation is to truthfully present valuable stories to our subscribers,” he said. “We’re working for them to help deliver useful, actionable intelligence by being acutely even, fair, and objective. We’re here to do the hard work of simplifying complexity and we pass on the benefit to our subscribers so they can make more informed business decisions.”

— Mark Robichaux

Making the Cut In Paper Reduction

The Wire is not looking to put any cable lawyers out of business, and neither is the document-shredding company that is the subject of this item — which advises customers to consult an attorney before deciding what to shred.

But Shred-It has put out a handy rule of “don’t-cut-your-thumb” list for when you can safely — that’s the optimum word — consign documents to the whirling blades of document disposal.

Those include four years for sale reports and a whopping seven years for “worthless securities.” (Oops, pardon us while we recover some things from the recycling bin.) Performance records for terminated employees must also be preserved for seven years, though some of those will probably stick in memory longer than that without a paper reminder.

We are reminded at this juncture of favorite performance reviews: “Works well when trapped like a rat,” and “has deprived a village somewhere of an idiot.”

To check out all the retention deadlines — before checking with your friendly and helpful cable attorney — visit multichannel.com/July8.

— John Eggerton

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