Does this make CVC any more attractive?:
Cablevision Nears Agreement
To Sell Bravo Channel to NBC
Deal Valued Around $1.2 Billion
Could End Spat Between Two Firms
NEW YORK -- Cablevision Systems Corp. is nearing an agreement to sell the Bravo
entertainment channel to NBC for about $1.2 billion in a deal that could end a spat between the
two companies, people familiar with the matter say.
The discussions, which have periodically gained and lost momentum, still may not result in a
deal, these people cautioned. The Dolan family, which controls Cablevision, has been close to
selling Bravo and other assets in the past but backed out at the last minute.
Under the scenario currently being discussed, General Electric Co.'s NBC wants to swap all or
part of its stake in Rainbow Media Holdings, a Cablevision programming subsidiary, for
ownership of the Bravo channel. In a filing with the Securities and Exchange Commission
Friday, NBC stated that it "from time to time considers various strategic transactions" with its
shareholding in Cablevision, including sales and acquisitions of selected Cablevision assets. It
stated that "there is no certainty that any transaction involving [Cablevision] will occur." NBC
and Cablevision declined to comment.
Buying Bravo, which runs movies and series like the "Inside the Actor's Studio" program,
would give NBC another outlet to show its programming and would help defray programming
costs. For Cablevision, whose stock has plunged this year on repercussions from the Adelphia
Communications Corp. scandal and funding concerns, the deal could remove a large
shareholder and potential obstacle to plans to sell pieces of its business to reduce its $7.5
billion debt.
Tensions have recently mounted between NBC and Cablevision over Rainbow, people familiar
with the matter say. NBC became a shareholder in the programming unit through a series of
partnerships that were consolidated in the mid-1990s with the idea that they would eventually
go public or become a tracking stock. Cablevision later created a tracking stock for Rainbow,
whose main media assets are Bravo, American Movie Classics, WE Women's Entertainment,
Independent Film Channel and MuchMusic USA. NBC, however, only converted a small
number of shares.
In August, under growing financial pressure, Cablevision pulled the tracking stock and
converted the Rainbow shares back into Cablevision shares.
The decision angered NBC because it diluted Cablevision shares. In addition, without the
tracking stock, NBC could only convert its Rainbow shares into Cablevision stock, which has
fallen more than 80% this year.
NBC holds about 21% of Rainbow. If it opts to, NBC could convert its investment in Rainbow
into 53 million Cablevision shares, giving it about a 16% stake in Cablevision. NBC now owns
outright about a 6% stake in Cablevision, including the little tracking stock it held that was
automatically converted into Cablevision stock in August. NBC made the regulatory filing
because it converted some of its investment in Rainbow into Cablevision shares.
Exact terms on the Bravo deal are still being negotiated. Under broad outlines of the
agreement, Cablevision would take back NBC's shareholding in exchange for Bravo. The deal
may also include cash or other considerations, though the exact terms haven't been worked
out. While the deal will likely be valued at about $1.2 billion, the price is based largely on an
estimate of the Cablevision stake.
NBC has been frustrated with Cablevision during negotiations before. In late 2000, Cablevision
put up for auction Rainbow's group of cable networks, which was expected to fetch about $4
billion in stock and cash. At the last minute, the Dolan family called off the auction. Instead,
the Dolans sold a stake in the media assets to Metro-Goldwyn-Mayer Inc., which may now be
interested in doing a deal with the remaining channels, either through a distribution agreement
or broader merger.
The talks with NBC come at a difficult time for Cablevision. The company amassed a huge
debt load to finance the costly upgrade of its cable systems as well as ill-fated acquisitions of
Clearview Cinemas, a movie-theater chain, and The Wiz, an electronics retailer. While a
stock-swap deal won't immediately help lower Cablevision's debt, Cablevision would have
more freedom to negotiate the sale of other assets with NBC removed as a major shareholder.
Cablevision, which traded as high as $87 a share in February 2001, fell to under $5 a share in
August. In 4 p.m. composite trading Friday on the New York Stock Exchange, it was at
$7.49, off 22 cents.
As part of its efforts to reduce debt, Cablevision announced a major retrenchment effort in August including jobs cuts and
reductions in capital spending. The company also recently hired financial advisers to help sell spectrum licenses owned by
Northcoast Communications, a small wireless telecommunications business in which Cablevision owns a 49% stake. |
