Cablevision Stock Up Despite Mixed Q2

Seibert Says MSO ‘Out of the Buy-Side M&A Game’

Cablevision stock soared in early trading Friday as investors appeared to ignore a mixed second quarter earnings report, instead focusing on speculation that the Bethpage, N.Y., cable operator could be an acquisitions target.

Revenue rose about 1% and adjusted operating cash flow fell 11.2% in the period as the New York Metropolitan Area cable operator said it lost 20,000 basic video subscribers and added just 1,000 high-speed data and 3,000 telephony customers in the period.

Investors instead were focused on the possibility that Cablevision could be an acquisitions target – either by Time Warner Cable or Charter Communications.

Cablevision shares rose as high as $20.16 each (up 8% or $1.52 per share) in early trading Friday. The stock was priced at $19.25 each at about 1 p.m. Aug. 2, up 3% or 61 cents each.

The run-up in the stock echoed a similar increase in Time Warner Cable shares yesterday (Aug. 1), when investors drove up that stock by more than 3%,  hoping its sluggish results would force it into a deal.

Coincidentally, TWC shares fell 2% in early trading on Aug, 2 after a report in Bloomberg News said Charter and one of its largest shareholders, Liberty Media, had had discussions about possible M&A with Cox Communications.  Cox spokesman Todd Smith said the company does not comment on rumor and speculation.

Ever since Liberty, led by cable’s most legendary deal maker John Malone, invested $2.6 billion in Charter for a 27% stake in the company, M&A fever has swept the cable  industry. Malone has helped fuel the deal speculation fires, calling Charter a “horizontal acquisitions machine.”

Cablevision tried to squelch any deal speculation on its conference call with analyst Friday morning, with CEO James Dolan stressing that management is focused on growing the existing business.

“Our plans are to continue to proceed n terms of operating the company in the best interests of the company and its shareholders,” Dolan said on the call. On the possibility of a deal, Dolan said, “You never say never, but other than that we really don’t have much to say about it.”

Investors, itching for a big deal in the cable space, took that comment as Dolan’s admission that he would be open to a deal.

Chief financial officer Gregg Seibert inadvertently added fuel to the fire when he said in response to an analyst question on the call that Cablevision had no plans to purchase cable assets itself.

Seibert noted that Cablevision had recently completed the sale of its Optimum West assets – the former Bresnan Communications – and that the company was firmly committed to its Northeast region footprint.

“At this point in time we’re out of the buy-side M&A game and focused on operating our business,” Seibert said on the call.