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Investors turn down Cablevision buyout

BETHPAGE, N.Y. - The Dolan family, which built Cablevision Systems Corp. into one of the most successful cable TV providers in the country, is going to have to keep dealing with public stockholders for the foreseeable future.

Shareholders yesterday rejected a $10.6 billion bid from the Dolans to take Cablevision private, clearly seeing the company as more valuable than the price the Dolans had agreed to pay. Cablevision has 3 million cable customers in the New York area and owns Madison Square Garden and the New York Knicks.

Chief executive James Dolan revealed the results of the vote at a special shareholder meeting at company headquarters here. Dolan said the family was "disappointed" in the outcome but still viewed it as a vote of confidence in the company and its leadership.

On that point, the Dolans and their investors agree. Large Cablevision shareholders, Wall Street analysts, and shareholder advisory firms all opposed the Dolans' effort to take the company private.

Ironically, Cablevision's own success undermined the buyout plan. The company has been a leader in signing up customers for premium services such as high-speed Internet and digital phone, a three-way package known as "triple play" which also tends to keep customers around longer.

Craig Moffett, an analyst with Sanford C. Bernstein, called the outcome an "unequivocal vote" that the Dolans' price of $36.26 per share wasn't enough. Moffett called the vote "a courageous decision to make for any money manager," knowing it was sure to result in a short-term decline in the stock price, but also "a tremendous vote of confidence in the company."

Sure enough, Cablevision's shares traded down after news of the vote came out, declining $1.04, or 3.3 percent, to $30.82 in heavy trading, after the immediate guarantee of a $36.26 per share payout evaporated.

However, Moffett said Cablevision has a strong ability to generate cash and trades at a premium to its rivals, with a value of $5,000 per subscriber, versus $3,600 per subscriber at industry leader Comcast Corp.

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