The Dolan family behind Cablevision seems to bid to take the company private every time the share price flags, and wouldn’t you know, the share price perks up a bit. The logic behind the family taking it public has always been that shareholders don’t understand how valuable the asset is, so the Dolans want it back.
The New York Times claims this week that this time the deal is on the verge of getting done, something we will believe only when the paperwork is signed. This time the price is $10.5 billion in cash, making it $23 billion if you include the assumption of existing debt.
The NY Times describes the relationship between the Dolans and the Board as a ‘tortured stalemate’ but we think the issue is that Cablevision is in the road of a ten ton armor plated truck with Verizon written on the side, complete with the backing of the Bush administration for big business and powered by the popularity of its mobile arm, while Cablevision has more debt than revenues. Last year it had just under $6 billion in revenues, lost $126 million, paid $891 million in interest charges and still has $12.5 billion of debt.
The company has 3.1 million cable subscribers in the New York region, was the first US cable operator to offer a solid VoIP based voice element to bring out a triple play at $99, and has one of the most up to date digital networks out of all the US cable operators. It’s problem is largely debt, and there is the distinct possibility that Verizon’s rising FiOS tide of digital TV will stunt Cablevisions so far considerable growth.
Other than its cable business Cablevision owns the Madison Square Garden, Radio City Music Hall, the New York Knicks and the New York Rangers.
The Board says that it is considering the new offer, reportedly 20% higher than the last offer at $36 a share, and this is driving up the share price, but the fact that it has reached nothing like $36 yet, suggests that investors out there don’t think a deal really will be done.
Also the Dolans themselves, Charles and son James, have often showed they have vastly differing visions for where the family business should go, especially over the Father’s HD satellite brainchild Voom, that son James closed and sold the assets of. Realistically the Dolans must have had guidance from the board about what is an acceptable price and have perhaps been out there raising it these past few months, so perhaps this is a real story after all.