Pali Research media analyst Richard Greenfield continued his assault on what he believes is a lowball offer from the Dolan family to take Cablevision Systems private, writing in a research note that the family could raise its $35.26 per share offer to at least $42 and still keep its debt at a manageable level.
In his report, Greenfield wrote that while the Dolans may say publicly that their $10.6 billion offer for the remaining equity in Cablevision will stretch them to the limit — the deal is being financed with $15.5 billion in debt — selling off its Rainbow Media Holdings assets will give the family some breathing room.
With Rainbow valued at about $4.6 billion, the Dolans could immediately take down Cablevision’s debt-to-cash flow ratio from 9 times 2007 estimated cash flow to 6 times. If the sale of Rainbow doesn’t appear appetizing to the family, Greenfield has two other suggestions: significantly reduce the losses at its Other Programming division (which he estimated to be about $100 million, pro forma for the April sale of its non-New York-based regional sports networks) and increase basic video prices by $1 per month. Those two moves, Greenfield wrote, would increase 2008 estimated cash flow by $140 million and bring 2008 leverage down to 6.1 times.
“We believe investors should not approve the $36.26 Dolan family offer; rather, they should push for a higher bid of at least $42 per share today, or force the Dolans to wait several months to enable a bid closer to our 12-month target of $50,” Greenfield wrote.