Dolan Family Played Hardball

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Cablevision Systems’ ruling Dolan family’s $10.6 billion proposal to take the cable company private almost went the way of the family’s previous two failed offers, as members of a special directors committee tried to hold out for more money, a filing with the Securities and Exchange Commission said Thursday.

According to the filing, the Dolan family restarted negotiations with the special committee -- independent directors Thomas Reifenheiser and John Ryan -- shortly after the two rejected the family’s second going-private offer (for $30 per share) as too low Jan. 16.

According to the proxy, in early March, Cablevision founder and chairman Charles Dolan discussed with members of the company’s board of directors several financial options. Those included issuing another special cash dividend to shareholders -- Cablevision issued a $10 per share special dividend in 2006 after its second proposal failed -- and a possible stock buyback.

By mid-March, the Dolan family -- including Cablevision CEO James Dolan -- generally discussed with the board its continued interest in pursuing a going-private transaction.

In early April, after meeting with lawyers and financial advisers, the committee said it would not consider a proposal that was not in excess of $33 per share. Later, after presentations by the family regarding Cablevision’s operating performance, its performance relative to its peers in the cable industry and analysts’ projections, the special committee said it would only consider an offer in excess of $36 per share.

After several days of back-and-forth negotiations, the Dolan family agreed in the early hours of May 2 to increase their offer to $36.26 per share.

But the special committee, after consulting with its advisers, made a counteroffer of $36.50 per share. It was then that the family appeared to put its foot down and, more important, the special committee appeared to listen.

“The Dolans responded by reiterating their position that they would not increase the offer price in excess of $36.26 per share under any circumstances and that, if a deal were not reached that morning, they would rescind their proposal and negotiations would terminate,” the proxy stated.

After reviewing the proposal again and consulting with their advisers, the special committee determined that the $36.26-per-share proposal was fair to shareholders. The deal was announced later that day.

Although the special committee approved the deal -- which values Cablevision's cable operations at about $5,340 per subscriber, or about $16.6 billion -- a “majority of the minority” of shareholders not affiliated with the Dolan family still need to sign off on the deal at a special meeting of shareholders. The proxy statement did not specify a date for that special meeting.

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