Waiting Could Cost Dolans

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Cablevision Systems' ruling Dolan family may have to dig deeper into their considerable pockets if their quest to take the cable company private is to become a reality, according to one analyst that covers the company.

It's been three months since the Dolans made their May 2 $10.6 billion, $36.26 per share offer to take the company private, obtaining approval from a special committee of Cablevision's independent directors. All that is left is to receive approval of the deal from a “majority of the minority” of shareholders not affiliated with the Dolan family.

But Cablevision has yet to set a date for a special shareholders' meeting to vote on the proposal, while the stock price has soared past the Dolans' May 2 offer price. As of July 19, Cablevision stock was priced at $38.22 per share.

Miller Tabak media analyst David Joyce said the longer the Dolan family waits, the higher the ultimate price they may have to pay.

“Now you've got people clamoring for $50 a share and a couple of weeks ago it was $45 a share,” said Joyce. “If they just came out and said $40 [per share], maybe they could get it done.”

What may be holding up the deal, Joyce said, are negotiations with some of the larger minority shareholders, including the possible inclusion of “stub equity,” which would allow shareholders to participate in a future sale, possibly to Time Warner Cable.

Adding confusion is a proxy statement the company issued in late June, with financial projections through 2011. During that time frame, Cablevision revealed that its free cash flow (cash flow after interest payments and capital expenditures are made) would more than double by 2011, to $2.6 billion, from an estimated $1.1 billion this year.

That prompted Sanford Bernstein cable and satellite analyst Craig Moffett to speculate that Cablevision could in fact be worth twice the Dolans' $36.26-per-share offer.

“I think that disclosure did hurt them [the Dolans],” Joyce said.

Joyce said that he believes if the Dolans do raise their price for Cablevision, it won't be above $40 per share. And he speculated that the Dolans' stubbornness is partly due to a desire to goose the stock price.

This is the third time in little more than two years that the Dolan family has tried to take the company private; its two previous offers were deemed too low by the special committee.

But Joyce said that even if the family's latest attempt fails, there is an incentive to eventually come back with another offer.

“It's nothing but helping the Dolan family to keep coming out with offers and playing hardball,” Joyce said. “Their holdings keep increasing and public holders' stake keeps increasing.”

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