Cablevision Stock Swoons On Deal Chatter


Cablevision Systems stock took a beating Wednesday as market chatter reached a fever pitch that the company may be on the cusp of a deal, including speculation that it may be a bidder for Bresnan Communications.
Cablevision shares plunged as much as 6.1% ($1.45 each) in early trading Wednesday to $22.02 per share. The stock closed June 9 at $22.15 per share, down $1.32 (5.6%), according to the Nasdaq Web site.
In a research note, Miller Tabak media analyst David Joyce wrote that possible scenarios that could have prompted the drop include Cablevision emerging as one of the final bidders for Bresnan Communications systems in the Midwest; or that the Bethpage, N.Y. MSO is in talks with Charter Communications about a deal involving the St. Louis-based operator's systems either in Connecticut or elsewhere.
Bresnan went on the block in March and final bids for the auction began coming in on Tuesday and are still coming in, according to people familiar with the process. Those same people said the 6 to 10 expected bidders are evenly split between strategic players like Suddenlink Communications and private equity funds. And while sources familiar with the process said that Cablevision was among those that made it to the second round, it is still too early to tell who will ultimately emerge as the lead bidder.
Bresnan, which has about 320,000 customers in the Midwest, was expected to attract prices in the $1.2 billion to $1.6 billion range.
Bresnan officials declined comment.
Joyce wrote that the Bresnan systems don't make much sense geographically for Cablevision - the Bresnan properties are located in Colorado, Wyoming, Montana and Utah and Cablevision is clustered around the New York metropolitan area. However, he wrote that a deal to acquire Charter's New England properties could benefit both parties.
Charter has about 336,000 customers in New England, including subscribers in Connecticut, Massachusetts, Vermont, New York, and Rhode Island. Since emerging from Chapter 11 bankruptcy in November, speculation has been strong that Charter would be interested in divesting of some of its properties.
Cablevision issued a statement citing its longstanding policy not to comment on rumors in the media."
Charter Communications also declined comment.
In his research note, Joyce noted that the market has already made its preference known regarding any potential deals: don't do it.
"If a deal were to occur, some shareholders have already voiced frustration in the market today that they would prefer more return of capital than an empire-build; but we have to wait and see what materializes - financially smart deals could ensue if done at the right price," Joyce wrote.
While there is no evidence that the two companies are talking, a Charter deal would fit with Cablevision CEO James Dolan's comments in Multichannel News in May that the MSO would consider expanding outside its footprint and that it would look for properties where it could apply its operating expertise.