The Dolans have failed in their attempt to take Cablevision private:
Dolans’ Bid to Take Cablevision Private Is Rejected by Shareholders
By ANDREW ROSS SORKIN
Published: October 25, 2007
Shareholders blocked the Dolan family’s $10.6 billion bid for Cablevision Systems yesterday, the largest rejection of a buyout ever.
The outcome leaves Cablevision, which also owns Madison Square Garden, Radio City Music Hall, the New York Knicks and the New York Rangers, as an independent company. And it ends, for now, two years of work by the Dolans, the colorful dynasty that controls the cable empire, to take it private.
While the rejection was not unexpected, it demonstrated the increasing skepticism about public-to-private transactions and whether shareholders are getting a fair price. No other deal of this size has ever been rejected; the next-largest deal to be voted down was an effort by the investor Carl C. Icahn to buy Lear, the auto parts maker, for $2.4 billion last year.
Though Cablevision did not provide a breakdown of the vote, many large shareholders, proxy advisory firms and analysts had expressed reservations about the offer of $36.26 a share. The largest outside shareholder, ClearBridge Advisors, and the fund manager Mario Gabelli both opposed the buyout, saying the price was too low. They contended that if the company were sold to a rival like Time Warner, it would command a premium of more than $40 a share.
The Dolans said early on that they would not sell the company, which is based in Bethpage, N.Y., to anyone but themselves.
Mr. Gabelli, furious about the bid, had filed a notice before the vote that he planned to exercise his shareholder appraisal rights, which would allow a Delaware court to determine the fair value of his shares and could have led to a protracted legal battle had the deal been approved.
In a statement, Charles F. Dolan and James L. Dolan tried to spin a positive angle yesterday. “While we are disappointed that shareholders did not approve the transaction, there is really nothing negative about today’s outcome,” they said. “We see today’s outcome as a vote of confidence in the prospects of Cablevision, its management team, its 20,000 employees and the industry’s future.”
Yet the vote was clearly a repudiation of the family’s bid. “The rejection is due to minority investors believing the offer is too low,” said Espen Eckbo, director of the Tuck School of Business at Dartmouth’s Center for Corporate Governance. “One issue is why the Dolan family would lowball in a setting where minority shareholders have the right to an independent fairness opinion provided by the board.”
Some analysts see a silver lining in the outcome, despite Cablevision’s dropping 3.26 percent to $30.82 a share. Richard Greenfield of Pali Research, who lobbied against the Dolans’ previous efforts to take the company private with missives titled “Do Not Let Chuck and Jim Dolan Steal CVC,” put out a note to investors yesterday suggesting a 12-month price target of $47 a share.
He suggested Cablevision could issue a big dividend and might look to sell noncore assets, like some of its cable channels, “to bring down leverage, either to enable a large dividend payout and/or drive yet another Dolan attempt to take the company private.”
Mr. Pali also raised the prospect of finally selling the company to Time Warner. “While TWC has enough trouble with its own operations today, we continue to believe they want/need to own CVC long-term. Given that it is now abundantly clear that CVC shareholders do not want to sell CVC unless it is auctioned to all parties, could the Dolans actually decide to sell CVC? Unlikely, but always remains a possibility.”
One unlikely group that is happy the deal did not go through: the banks that were financing the bid. Bear Stearns and Merrill Lynch, which have both been hard hit by the credit squeeze, led the financing and committed to rates that probably would have cost the banks millions because they would have had to sell the debt at a discount to other investors.
Less clear is the reputation of the independent directors who approved the deal and the banks — Morgan Stanley and Lehman Brothers — that advised them. At the time the bid was announced, both groups were heralded for blocking two previous efforts by the Dolans to take the company private at lower valuations. But now that shareholders have rejected the deal, some investors are questioning whether the directors should have approved the transaction.
nytimes.com |
