Cablevision shares rose almost 10% to close at $35.90 on Wednesday after the company announced it will sell itself to the Dolan family for $10.6 billion in cash. Including debt, the price is almost $23 billion. The Dolans will pay $36.26/share, a premium of 34% above their first bid in 2005 and 11% above the shares' Tuesday close. The deal is contingent upon a vote later in the year of non-family shareholders, some of whom believe the offer undervalues the company. Cablevision is about two years ahead of its rivals in spending on systems upgrades and product launches, so capex could now decrease. Privatization, according to the Dolans, will allow the company to operate from "a long-term, entrepreneurial management perspective that is not often appreciated by the public markets' constant focus on short-term results." In related news, Moody's and S&P said Wednesday they may downgrade Cablevision further into junk territory. The possible cut would "[reflect] the potential for a significant degradation of credit measures if the [Dolan] transaction were to be significantly debt-financed, with no sale of assets and accompanying debt paydown," said S&P. The Dolans plan to finance the deal with $2.1 billion in equity through reinvestment of their company shares and $15.5 billion in debt financing. The company's existing $11.6 billion of debt will remain outstanding.
Sources: Wall Street Journal, Bloomberg, MarketWatch, Reuters (I, II), New York Times
Commentary: Cablevision: The Dolan Family Finally Seals The Deal • Dolans Try Again to Take Cablevision Private
Stocks/ETFs to watch: Cablevision Systems Corp. (CVC). Competitors: Verizon Communications Inc. (VZ), Comcast Corp. (CMCSA), DirecTV Group Inc. (DTV). ETFs: Consumer Discretionary SPDR (XLY), PowerShares FTSE RAFI Consumer Services (PRFS)
Conference call transcripts: Q4 2006
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