The Dolan family will have to endure the slings and arrows of the public markets for at least a little while longer after a special transaction committee rejected its latest offer to take Cablevision Systems private.
In a letter to the Dolan family Tuesday night, Cablevision’s special transaction committee -- consisting of independent Cablevision directors Thomas Reifenheiser and John Ryan -- shot down the family’s offer of $30 per share for the remaining stock they don’t already own, calling it “inadequate.”
The Dolans made their initial offer ($27 per share) to buy the 80% of Cablevision stock they don’t already own in October. After Cablevision stock went on a tear -- it reached as high as $29 each since the first offer was made -- the Dolans upped the ante, offering $30 per share ($8.9 billion) for the stock last Friday. At that time, the Dolans said that offer would be their “best and final price.”
The family also set a 5 p.m. Jan. 17 deadline for the special committee to either approve or reject the offer.
The special committee wasted little time, firing off its rejection Jan.16 at around 8 p.m.
In its letter to the Dolans, the committee said the revised offer “does not represent fair value for the company's public shareholders, nor does it contemplate a transaction that is in their best interest.”
In its letter, the committee referred to Cablevision’s industry-leading performance -- it was a pioneer in voice services and leads the nation in basic-subscriber growth -- saying that it is well-positioned to address competitive challenges ahead.
The rejection also begs the question as to whether Cablevision is now in play. With its New York metropolitan-area footprint, the cable company is an attractive target, especially to Time Warner. And Time Warner’s cable unit, Time Warner Cable, is expected to have its own separate public stock by the end of the month, providing an attractive currency for a potential deal.
The committee acknowledged that the process has taken longer than expected -- nearly four months -- and said that it informed the family that its initial offer was too low and provided guidance “as to values that the special transaction committee would be willing to consider.”
“Our discussions with you also included suggestions of various methods to produce additional value for the public shareholders, including mezzanine debt and preferred stock financings, private equity and strategic partnerships, certain asset sales and public shareholder economic participation in future sale transactions,” the letter added.
The Dolan family had been constrained in its offer by debt covenants that set a ceiling of $30-$32 per share for their offer. However, several analysts have said in the past that the family could significantly increase its bid by either selling off Cablevision’s Rainbow Media Holdings programming unit or taking on an equity partner. It seems obvious that the special committee had similar ideas.
Although the committee gave its response well ahead of the Dolan-imposed deadline, it appears that there is little room for further negotiation.
“Since you have stated that the revised offer is your best and final price, which expires at the close of business Jan. 17, 2007, we welcome the opportunity to continue to work with you, the other directors and management of the company with the objective of further enhancing the value of the company and maximizing value to the company’s public shareholders,” the committee wrote.
In a prepared statement, Cablevision said it would have no further comment.
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