Over to Rainbow


Cablevision Systems is reeling Robert Redford-founded Sundance Channel into its Rainbow Media programming stable, agreeing to buy it from owners NBC Universal, CBS and Redford for $496 million.

The 12-year-old channel — first owned by Viacom's Showtime (now part of CBS), Redford and Polygram Filmed Entertainment (which migrated to NBC) — went on the market in February after neither NBCU (which owns 57%) nor CBS (37%) could buy out the other partners.

When the deal closes, Cablevision's Rainbow Media Holdings will own 100%.

UBS Investment Bank handled the sale, said to have drawn interest from more than one strategic buyer.

Cablevision will be paying NBCU with 12.7 million shares in NBCU parent General Electric that it got through the sale of Bravo to NBCU in 2002. The asset had gained in value (possibly as much as $80 million), but Cablevision will be using it in a tax-free exchange.

CBS and Redford, who owns 6%, will receive cash. Cablevision said there'll be a cash adjustment with NBCU at closing based on the value of the GE shares in relation to the total purchase price.

Analysts think Cablevision will find cost savings through functional association with Rainbow channels IFC, AMC and WE TV. But it seems likely Sundance will continue as a separate channel: Redford's “continuing relationship” with the new owner is one such indication. Cablevision provided a photo of Redford and Rainbow CEO Joshua Sapan (see cover) after making the announcement on May 7.

Sundance has about 30 million subscribers. Pali Research analyst Richard Greenfield valued the deal at a pricey 24 times estimated annual cash flow of $20 million at the channel.

Sundance's programming is a blend of indie films and, increasingly, original series such as Iconoclasts and Live From Abbey Road, as well as newer environmental fare, such as Big Ideas For a Small Planet and the block Robert Redford Presents The Green.

Channel CEO Larry Aidem told colleagues in an e-mail message last week he would be working hard to facilitate the transition, and said there's “a short list of companies with both an enviable track record and the programming and distribution chops necessary to run cable networks successfully over the long term, and Rainbow is without question one of them.”

Aidem separately praised Aryeh Bourkoff, vice chairman of UBS's Technology, Media and Telecoms Investment Banking unit, with skillfully running a complex sale process.