Gabelli Tosses Wrench into Dolan Deal

Gamco Investors chairman Mario Gabelli has thrown another wrench into the Dolan family’s plans to take Cablevision Systems private, stating in a filing that he will exercise his appraisal rights for his shares.

In a Securities and Exchange Commission filing Tuesday – the eve of the special shareholders meeting to vote on the Dolan proposal – Gamco said it has submitted to Cablevision “written demands for appraisal of their shares pursuant to Section 262 of the Delaware General Corporate Law.”

Gamco said earlier this month that it was contemplating whether to exercise its appraisal rights. By exercising those rights, the Dolan deal inches another step closer to being scuttled.

In its proposal documents filed with the SEC in May, Cablevision said that if 10% or more of shareholders not associated with the Dolan family “dissent” – meaning that they exercise their appraisal rights – the family would walk away from the deal. Gamco owns about 8.4% of Cablevision shares not held by the Dolan family.

According to Gabelli, the appraisal rights give Gamco clients the flexibility of receiving a higher price for their Cablevision shares in the event the deal goes through.

Gabelli said that if the deal does pass muster with shareholders, he has about 30 days to hire an appraiser and have his shares independently valued. If that appraiser comes up with a price that is higher than the Dolan offer, then the Dolan’s would have to pay that price to Gamco.

“At the end of 30 days they notify me that they’ve closed the deal, within a certain period of time after that I can go ahead and start the process rolling, but I also can, depending on the world at the time, walk away,” Gabelli said. “I just preserved the option. But if I didn’t do it today, I don’t have that option.”

While the Dolans’ have said in their proposal documents that they would walk away from the deal if more than 10% of non-family shareholders dissent (exercise their appraisal rights), Gabelli said that provision could be waived.

“I don’t think it’s an automatic red light,” Gabelli said.

While Gamco also runs the risk that the appraisal will come in under the Dolans’ $36.26 per share offer, Gabelli has said in the past that he believes Cablevision is worth more than $50 per share.

Cablevision expects to vote on the Dolan family proposal at Cablevision headquarters tomorrow at 11 a.m. Although the Dolans own about 74% of Cablevision’s vote, they have said in the past that approval of the deal would require the consent of a majority of the minority of Cablevision shareholders not affiliated with the Dolans.

In an earlier SEC filing, Gamco said that it would vote against the Dolan proposal. Since then shareholders – including Gamco – representing about 33% of non-Dolan Cablevision shares have come out against the proposal.

Cablevision declined to comment.