Rainbow gets a go

IRS clears Cablevision to spin off programming unit

Cablevision Systems said Monday that it has received a ruling from the Internal Revenue Service that would effectively allow it to spin its Rainbow Media subsidiary into a separately traded company if it so chooses.

The Woodbury, N.Y.-based cabler has been waiting on the IRS for months as the company ponders the future of Rainbow, which is 75% owned by Cablevision, 25% by NBC.

The unit houses Cablevision’s content businesses, including cable nets AMC, Bravo, the Independent Film Channel and Romance Classics as well as the local MSG Metro Channels, local News 12 networks and regional sports net Fox Sports New York. It also holds the assets of Madison Square Garden, including the eponymous arena, the New York Knicks and Rangers and MSG sports channel. Radio City Entertainment and the Rainbow Advertising Sales Corp., a regional ad sales group, are also part of the mix.

Cablevision said it has not decided whether to issue separate Rainbow stock although many Wall Streeters expect the company to create a tracking stock sometime next year, retaining control of the unit. Tracking stocks, which have been very much in vogue of late, allow a corporation to break out a piece of its business — usually one it considers undervalued — for investors.

Sale possible

Cablevision’s other option is a sale of Rainbow or, more likely, of some of its assets, which has also been under consideration.

USA Networks chief Barry Diller has been interested in buying AMC, IFC and Bravo, but the two sides couldn’t agree on price; others have also eyed the cable assets. Cablevision CEO James Dolan has stated publicly the company would be willing to part with the nets.

Cablevision stock rose nearly 6% Monday to close at $68.50.