Could the Dolans miss out on the prize yet again? Their third offer, in May, to take Cablevision private for $22bn, finally won over the special committee – which deserves credit for pushing the price up a full 54 per cent from the original June 2005 bid (adjusted for the special dividend).
But even at $36.26 a share, the price is no knock-out when compared with other cable valuations. A few high-profile investors, including T Rowe Price and Gabelli Asset Management, have signalled that they believe the offer is still too low. Their views are being reinforced by Cablevision’s performance. The company’s own projections in a recent proxy filing underline the expected cash flow improvement ahead, partly as heavy capital spending tapers off. That is a reminder of why the Dolans want the asset. It also shows how they could justify paying more, even though Cablevision faces increasing competition from Verizon.
There remains the thorny problem of Dolan family control through super-voting shares. In a straight auction, Cablevision would probably fetch a price well above $40 from a strategic bidder. But the Dolans have said they will not sell, meaning the rest of the shareholder base cannot realise that full value. All they can do is vote down the Dolans’ offer if they think the company is worth more.
The fact that Cablevision shares are trading above the offer price suggests that is possible. But it is not the best solution for either side. Instead, external shareholders could accept that the Dolan family votes have real monetary value. How about a deal that secures the best value for all shareholders from a sale of the key cable assets to Time Warner or Comcast while offering the Dolans the chance to buy Cablevision’s other assets, including Madison Square Garden, at an attractive price? That might just keep everyone happy.