Cablevision Systems Corp.'s board of directors 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 flexibility.
With the spinoff, Cablevision said that Clearview is no longer for sale.
Cablevision said it would contribute $450 million to the spinoff.
Cablevision has approved an additional $114 million investment in the venture for this year. That is in addition to the $80 million Cablevision said it would invest in the venture in 2003.
Spinning off the DBS asset would likely make it more difficult to sell because of Internal Revenue Service regulations that prohibit companies from using a tax-free structure to spin-off businesses they intend to sell.
Investors apparently were pleased with the news, driving Cablevision stock up more than 12% ($2.43 per share) in 4 p.m. trading June 2 to $21.79 each. The stock gave back some of that ground in subsequent trading, finishing at $21.56 per share at 4 p.m. on June 4.