Takeover or "Take Under?" by Jacqueline Doherty
Summary: After being rejected on an earlier bid, the Dolan family -- majority owners of Cablevision Systems Corp. (CVC) -- have tabled a new offer of $36.26/share, which was approved by a committee of independent directors, but must now receive approval from a majority of its minority shareholders. Supporters note the offer is an 11% premium to pre-bid prices and 52% above share prices before the family's October 2006 bid. The company, they say, faces strong competition from Verizon Communications Inc. (VZ), who has already rolled out fiber in over 20% of its markets. At about $22 billion, the offer is more than 10x Ebitda, vs. 9x for Comcast and Time Warner Cable. Dissenters say the industry is undervalued, and should command closer to 12x. They say its parts (cable system, cable networks, Madison Square Garden, Knicks, Rangers) are worth $48/share now and should hit $58/share with improving results, prompting John Linehan of T. Rowe (who owns the stock) to comment, "They're trying to steal this company from under our noses." If the deal fails, Barron's sees shares down a few dollars now, but up 10-20% over the next 1-2 years. Barron's bets investors will block the sale, and the Dolans will either raise their offer, or shares will rise on improving earnings. Those who opt to sell should redeploy assets in Time Warner (TWX), Sprint Nextel (S), Viacom (VIA) and News Corp. (NWS).
Conference call transcript: Cablevision Q1 2007 Earnings Call Transcript