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MGM Out of Rainbow Picture

Metro-Goldwyn-Mayer Inc. agreed to sell its 20% interest in three programming
networks -- AMC, The Independent Film Channel and WE: Women’s Entertainment --
back to Cablevision Systems Corp. for $500 million.

That price is about $75 million less than the $825 million in cash MGM paid
for 20% of four Cablevision networks -- AMC, Bravo, IFC and WE -- in 2001. MGM
received $250 million in cash when Cablevision sold Bravo to General Electric
Co.’s NBC television unit last year.

The most recent deal is expected to close in the third quarter of this

In a prepared statement, MGM said the sale would give it more financial

"We are turning an asset for which the financial community gave us little
credit into more than $2 per share in cash," MGM chairman and CEO Alex
Yemenidjian said.

"Upon completion of the transaction, our balance sheet will be 100%
debt-free, which will give us more flexibility in pursuing other value-creation
opportunities for our shareholders," he added.

Those opportunities most likely include Vivendi Universal Entertainment,
which includes cable channels USA Network, Sci Fi Channel, Trio and NewsWorld
International, as well as Universal Studios and theme parks.

MGM is one of five bidders for VUE (along with Liberty Media Corp., NBC,
Viacom Inc. and two groups headed by former Vivendi vice chairman Edgar Bronfman
Jr. and oil billionaire Marvin Davis).

According to the deal, MGM will receive $250 million in cash and a note --
payable in five months in cash or Cablevision common stock -- for another $250

"MGM has been an excellent partner, and we have been grateful for its
support," Cablevision CEO James Dolan said in a prepared statement.

"For Cablevision, we are very pleased to again retain 100% ownership of our
Rainbow networks as we amicably exit this arrangement," he added. "We thank MGM
for this successful partnership and look forward to working with MGM in the

Cablevision also reportedly joined Bronfman in his Vivendi bid and is
expected to contribute its Rainbow Media Holdings Inc. programming interests,
which include the three networks.

Earlier in June, the MSO revealed accounting irregularities at AMC, firing 14
AMC employees including president Kate McEnroe. The U.S. Department of Justice
and the FBI are also reportedly conducting their own investigation of AMC.

According to UBS Warburg LLC cable debt and equity analyst Aryeh Bourkoff,
the sale works out to be about $18 per subscriber, or 15.6 times estimated cash
flow, nearly one-half the average valuations of $30 per subscriber (26 times
cash flow) for recent programming deals.

Still, Bourkoff added, in light of the VUE bids, the sale is good for both

"In our view, it makes sense that given that both Cablevision and MGM are
pursuing separate bids for the Vivendi assets, that they divide up their
ownership of these networks as it effectively represents the currency for each
party," Bourkoff wrote in a statement.

"MGM would need cash for its bid, and Cablevision could utilize the full
ownership of these assets as part of its bid," he added.

Investor reaction was lukewarm Monday. Cablevision shares
fell 20 cents each to $20.91 per share and MGM stock dropped 1 cents to $12.32.