Dolans Add $3 to Offer


After nearly four months of silence, the Dolan family raised its offer to acquire the remaining shares of Cablevision Systems Corp. they don't already own to $30 per share, a $3-per-share increase from their October proposal to take the company private, but a paltry premium to its current stock price.

The Dolans, led by Cablevision founder and chairman Charles and his son, company CEO James, made their original offer for the Bethpage, N.Y.-based cable company on Oct. 8. A special transaction committee made up of independent directors was named on Oct. 9 to evaluate the proposal.

While Cablevision's stock has risen more than $5 per share (24%) since the October offer, the company has been strangely silent in the months since. Last Friday morning that silence was broken.

In a Jan. 12 letter to the committee, the Dolans said the new offer was its “best and final price.” It has asked the special committee to make a decision by Jan. 17.

But the new offer represents a paltry 40 cents per share (1.4%) premium to Cablevision's closing price of $29.60 each on Jan. 11, the night before the Dolan family announced its new offer. At $30 per share, family members agreed to pony up $8.9 billion — compared to $7.9 billion for the previous proposal — to purchase the remaining 80% of Cablevision stock they don't already own. Including Cablevision's existing debt puts the value of the deal at about $20.1 billion.

Cablevision shares were down 81 cents each (2.7%) in early trading Jan. 12 to $28.79 per share.

Analysts have speculated for months that the Dolans would have to bump up their original bid, with most predicting a new offer would come in at between $31 and $32 per share, the upper limit for the family without taking on an equity partner, given debt-covenant restraints.

Analysts are split as to whether the company will accept the new offer.

In a research note titled “Don't Let Chuck and Jim Dolan Steal CVC,” Pali Research analyst Richard Greenfield wrote that while the Dolans noted Cablevision's share price increase since their original bid, the new offer does not take into account the huge appreciation in cable equities during the past year. In 2006, cable-operator stocks rose more than 40%, with Cablevision bringing up the rear with a 22.9% increase (not including a $10 special dividend), mainly because of the Dolan bid.

“We believe what matters is what has happened to cable equities since Oct. 8, 2006,” Greenfield wrote. “Utilizing our desired time period of relative performance, [Cablevision's] stock price has underperformed its cable peers, despite superior operating performance and the industry's most valuable assets.”

For that reason, and his belief that other bidders would pay at least a 33% premium to the new offer for Cablevision's assets — particularly Time Warner Cable, which could have a new cable stock as early as next week — Greenfield believes the special committee has no choice but to reject the offer.

Miller Tabak cable analyst David Joyce took the opposite view, writing in a research note early last Friday that he places “a high probability” on the committee accepting the Dolans' new offer.