Analysts doubt Dolans

Critics say Cablevision price too low

As Cablevision reported strong first quarter earnings Thursday, some prominent Wall Streeters raised a stink about the terms of the $10.6 billion buyout of the company by controlling shareholders Charles and James Dolan, saying it undervalued Gotham’s cable titan by as much as $14-$15 a share.

In a research note issued Thursday, analyst Richard Greenfield of Pali Research said Cablevision’s committee of independent directors had “rolled over” in approving the Dolans’ buyout bid, which values the company at $36.26 per share. Greenfield said the company’s value would likely climb to $50 per share within the year, based on its momentum in signing new subscribers to high-end digital services, or cable’s vaunted “triple-play” of offering voice, video and data services to subscribers.

Greenfield noted that Cablevision’s financials have been buoyed by its success in converting subscribers to digital and hanging onto them, which reduces the churn rate that often bedevils cable and satellite operators.

Fund manager Mario Gabelli told Reuters he believed the Dolans’ offer undervalues the company, which also owns Madison Square Garden and cable nets including AMC, IFC and WE, by as much as $4 billion. Greenfield was pointed in the note, saying that the Dolans were vying to take the company private in order to reap a windfall from an eventual sale to fellow cable giant Time Warner, which has made no secret of its interest in buying its primary cable competitor in the lucrative New York market.

A Cablevision spokeswoman declined comment Thursday.

The buyout deal unveiled Wednesday was approved by Cablevision’s two-person committee of independent board members but still needs to be blessed by a majority of the company’s outside shareholders. Cablevision chairman Charles Dolan and his son, CEO James Dolan, control about 20% of the company’s shares.

“The longer you make Chuck and Jim wait, the more money you make,” Greenfield wrote in urging shareholders to vote against the Dolans’ bid.

Greenfield noted that the Dolans have gradually upped their offer for the company during the past eight months in their effort to take the company private. The Dolans offered $27 a share for Cablevision last October, and upped it to $30 a share in January. The $36.26-per-share pricetag unveiled Wednesday amounted to a roughly 10% premium over its closing price earlier in the week. On Thursday, shares closed up 29¢ to $36.19, above its previous 52-week high of $35.84.

In its first quarter earnings, Cablevision demonstrated strong growth in its core cable business, with net revenue growth in the cable unit of 15.4% year-over-year to $1.14 billion, and its 12th consecutive quarter of subscriber growth of 73,000, a 2.4% gain over the same period in 2006.

Overall, the company reported a net loss of $26.3 million versus a loss of $58 million a year ago.

In a note to investors, Sanford C. Bernstein analyst Craig Moffett said the strong first-quarter results “bolster the case for a higher bid” and asked whether the Dolans could become “victims of their own success.”

(The Associated Press contributed to this report.)

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