Shareholders to Dolan: Buy Back Shares

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James Dolan’s three-day listening tour with major shareholders wound down Wednesday, with the Cablevision CEO listening to suggestions from shareholders who hold more than half of the company’s stock. And according to one person familiar with the meetings, most wanted the cable company to begin an aggressive share buyback program.

Dolan met with a handful of investors in several meetings on Monday, Tuesday and Wednesday. The Cablevision CEO, accompanied by chief operating officer Tom Rutledge and CFO Michael Huseby, was squired by representatives of Gabelli & Co., the institutional research and brokerage affiliate of Gamco Investors, itself a large holder of Cablevision stock.

According to one cable industry executive familiar with the meetings who asked not to be named, the Cablevision executives listened to pitches from several shareholders, but one theme seemed to dominate: share buybacks.

Dolan also offered shareholders an explanation as to why the company has not met with investors or participated in financial conferences since its third bid to take the company private was rejected last year—the company had spent two years trying to go private and needed time to recalibrate and figure out its next moves.

While Cablevision management hasn’t said what those moves will be, investors apparently want it to involve buying back stock.

“In general, people are favoring buybacks,” the executive said. “One of the questions was: ‘You offered $36.26 per share [to take the company private in 2007], and the stock went to $20 [per share]. Why didn’t you buy back shares then?’ They didn’t have an answer for that.”

Just how the company would finance a buyback is unclear. The current state of the credit markets would make it difficult to finance a buyback through debt. Some analysts have suggested that the company could sell or spin-off its Rainbow Media Holdings programming arm, which was also discussed at the shareholder meetings, the executive said.

But the executive said that shareholders are looking more at a partial Rainbow sale to finance a buyback, not a full spin-off or sale. He added that several shareholders noted that the value of its AMC network—which is enjoying critical acclaim and high ratings on the heels of shows like Mad Men and Breaking Bad—may never be higher and could be ripe for sale. (Some analysts have estimated that AMC is worth $2.8 billion alone)

The proceeds of that deal could then be combined with Cablevision’s expected $750 million in free cash flow next year to fund a substantial buyback.

“Nothing says you have to sell all of Rainbow,” the executive said.

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