Cablevision Clears Way for Spinoff


Cablevision Systems Corp. said its board of directors has approved a plan to
spin off its Clearview Cinemas chain of movie theaters and its direct-broadcast
satellite venture, Rainbow DBS, in a separate entity by the end of the year.

The spinoff would be tax-free to Cablevision shareholders, the Bethpage,
N.Y.-based MSO said in a statement.

Following the spinoff, Cablevision shareholders will own shares in both
Cablevision and the new entity and will have the opportunity to hold stakes,
depending on their particular investment objectives, in either Cablevision,
Rainbow DBS or both.

In addition, the spinoff is expected to provide the company with improved
access to capital, as well as a lower cost of capital and greater financial

Cablevision had been trying to sell its 57 Clearview theaters -- located in
the New York metropolitan area -- since the third quarter of last year, but it
has had few takers. So far, the company said, it has sold one theater and closed
another. With the spinoff, the MSO added, Clearview is no longer for sale.

The DBS venture has been a sore point for many investors, who believed that
the investment requirement was too high for a noncore business.

Cablevision has said in the past that the national service -- which would be
available to between 80% and 90% of the country and would offer a combination of
more than 100 high-definition and standard-definition channels -- would require
between $500 million and $1 billion.

In a press release, Cablevision said it would contribute $450 million to the
spinoff. The company added that it has approved an additional $114 million
investment in the venture for this year, in addition to the $80 million
Cablevision said it would invest in the venture in 2003.

Spinning off the DBS unit and theater chain solves one problem for
Cablevision: It would keep the DBS investments off the MSO's balance sheet.

Investors were apparently pleased with the news, driving Cablevision stock up
more than 14% ($2.79 per share) in afternoon trading Monday to $22.15 each before the stock closed trading at $21.79.

SunTrust Robinson Humphrey cable analyst Gary Farber said the spinoff
provided investors with a little more information, but he was hoping for
something else.

"They'd quantified what was an overhang," Farber said. "It's unfortunate that
they have to use the balance-sheet cash to get there."

In a research note, Deutsche Bank Securities Inc. cable analyst Karim Zia
also had mixed feelings about the spinoff.

In a report, Zia wrote that the investment in the DBS venture was "offset by
the removal of future financial exposure to Rainbow DBS through the

Cablevision said it still plans to launch a satellite for the service July
17. The company added that it would retain the New York rights to the DBS
service after the spinoff. Cablevision chairman Charles Dolan would serve as
chairman of the new entity, but no other Cablevision board members or officers
would overlap between the MSO and the new entity.