Last week, just after we had gone to press, the street talk turned out to be right and the Cablevision board accepted the bid for the company by its founding family, the Dolans.
We can’t help feeling that if they were a Private Equity group, they would break up the company into its component parts, drive down debt and refloat it at a later stage. The one concern on the horizon is that cable ‘per se’ will be impacted by a renewed competitiveness from telcos, and that was borne out by the fact that Cablevision did not make huge inroads into new voice revenues this quarter.
The deal means that all the Cablevision stock that the Dolan Family Group doesn’t own already will be converted into $36.26 per share in cash.
While the transaction requires the approval of a majority these shares, the transaction is almost certain to go through, since it represents a huge premium against the share price the company has had in the recent past and although the company pulled out stunning results for the quarter, the general malaise in cable operator stocks means that there is little will out there, apart from that of the Dolan’s, to mess about with a deal where the board has managed to get a decent price and has been seen to have carried out its job on behalf of shareholders.
The bid is largely seen as being worth $23 billion after adding the $12.5 billion the company holds in debt, and the cash that needed to change hands on the deal is $10.5 billion, with a further $5 billion of debt funding that needs to be moved about, so the family has had to raise $15.5 billion in total debt financing, secured no doubt against their existing shareholdings.
Cablevision revealed revenues of $1.6 billion for the quarter, on track for a year of over $6 billion, with big gains on its revenues and margins for cable TV up 15% to $1.01 billion, mostly on a continued shift to digital video, as well as shift into positive margin at Rainbow and a massive reduction in losses at Madison Square Gardens. ARPU was up to $117 per month per customer. Operating income was $176 million for the quarter, but after interest charges of $229 million the entire business made a $26 million loss, halving the loss from this time last year.