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Dolans drop Cablevision bid

Mon, 10/24/2005 - 8:00pm

Copyright 2005 TheStreet.com, Inc.

TheStreet.com

October 25, 2005 Tuesday 9:24 AM Eastern Time

By TSC Staff

From Lexis Nexis

The Dolan family, which controls Cablevision (CVC:NYSE), backed out of a plan to take the Long Island-based cable company private and demanded a big dividend.

The Bethpage, N.Y., company issued a statement Tuesday morning saying its board had received a letter in which CEO James Dolan and his father, founding Chairman Charles Dolan, withdrew their June 19 offer to take Cablevision private and spin off its Rainbow Media unit. Cablevision also said the Dolans recommended the board consider a one-time $3-a-share dividend. The board said no decision has been made on the dividend and it is considering the proposal.

The news is likely to hit Cablevision shares, which have been in decline anyway since the Dolans goosed the stock in June with their buyout offer. Shares of the No. 6 cable company jumped 19% in a day after the Dolans said they would pay $7.9 billion for the 80% of the company they don't own.

The proposed deal would have paid stakeholders $21 a share in cash, along with shares of the long-anticipated spinoff of media and entertainment assets into separately-traded Rainbow Media. Those holdings are worth an additional $12.50 a share. The price represented a 24% premium over Cablevision's closing level the day before.

After the acrimonious Voom fiasco and a controversial dark-horse bid for Adelphia's cable systems, the Dolans seemed to have finally found a business route that even they could agree on. But in their own Tuesday morning press release, they indicated that they just want to treat all shareholders equitably.

"Despite good faith negotiations over the past four months, it has become clear that we will be unable to reach agreement with the Special Transaction Committee on the terms of our proposal," they said. The Dolans also noted that during this period there has been a decline in communications sector valuations and an increased competitive environment.

"We continue to have full faith and confidence in the near and long-term prospects of the Company and remain committed to the goal of providing value to all shareholders," the Dolans said in their letter to the Board. "In addition, we recognize from the strength of the financing commitments received in connection with our proposal that the credit markets currently value the Company's growing cash flow to a greater extent than the equity markets. This recommendation is driven by a desire to treat all shareholders equally, to provide clarity for the Company's security holders and to take advantage of the robust credit markets and attractive interest rate environment."

Given the Dolans' 20% stake in Cablevision, a $3 dividend would net them in the neighborhood of $170 million.

Early Tuesday, Cablevision was set to open at $27.80.

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