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Rainbow nets spinoff set

AMC’s Don Draper, of Madison Avenue, will soon be taking up residence on another famous New York thoroughfare, Wall Street.

Investors are anxiously awaiting the arrival Friday of a third pure-play cable programmer as Cablevision prepares to spin off its former Rainbow Media business, newly named AMC Networks, home of the hit show “Mad Men.”

AMC will join Discovery Communications and Scripps Networks Interactive as the biz’s only public companies solely focused on cable channels, with dual revenue streams of advertising and distribution fees that Wall Street has loved.

At the same time, AMC will become the latest spinoff by a media company; in recent years MSG has separated from Cablevision, and AOL and Time Warner Cable from Time Warner. The prime reasons for such a move have been to focus on core businesses or jettison underperformers.

Cablevision is set to spin its family of channels, including AMC, IFC, WeTV and Sundance, on Thursday with regular trading commencing on Nasdaq on Friday. Wall Street is bullish about the prospect of a new cable-only investing option.

“With the content pendulum swinging in AMC’s favor, we believe AMC has the ability to drive notable higher advertising sales over the next few years,” said BTIG analyst Rich Greenfield.Greenfield is predicting AMC Networks shares could rise to $50 in the first year, after initial pricing at about $35.

He also predicts that AMC Nets could be bought by another company in 2013, giving the company time to ramp up affiliate fees and further boost ratings. With an enterprise value of about $4.8 billion for AMC Networks, Greenfield said suitors could include CBS, NBCUniversal and Time Warner.

The new company is expected to have revenues of $1.2 billion this year, with net profits of $129 million.

Free of cable programming, Cablevision is now primarily a cable operator, bulkding up earlier this year with the addition of the Bresnan systems out west. The exceptions are its Newsday newspaper holdings and the Clearview Cinemas chain.

In addition to AMC, AOL, Time Warner Cable and MSG, News Corp. has talked about spinning off SkyNews as part of its buy-in of BSkyB. Liberty Media John Malone plans to spin off Liberty Starz and Liberty Capital. Lionsgate, while silent on the topic lately, once pondered spinning off its digital assets, including Break Media. And publisher Conde Nast is considering spinning its social news media site Reddit.

“The trend is symptomatic of the frustration with the underperformance of share price and subsegements of entertainment not being recognized,” said Harold Vogel, founder of investment firm Vogel Capital. “In most cases, they work, by adding value.”

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