Time Warner Considers Bid for Cablevision, May Face Family Resistance

Strategic Insights -

Time Warner, the nation's second-largest cable company, is reportedly considering a bid for Cablevision Systems Corp., but may face opposition from the Dolan family, which is seeking to take the company private. The Dolan family has offered to pay $7.9 billion to public shareholders to acquire the company, but Time Warner could potentially bid up the price and gain control of the cable and telecommunications assets. However, industry executives warn that the Dolans' 71 percent controlling interest makes a hostile bid unlikely, and that a sale to Time Warner may be complicated by the family's desire to take the company private.

Key Takeaways:

  • Time Warner is considering a bid for Cablevision Systems Corp., which could potentially put a stop to the Dolan family's plans to take the company private.
  • The Dolan family has offered to pay $7.9 billion to public shareholders to acquire Cablevision, but Time Warner could potentially bid up the price and gain control of the cable and telecommunications assets.
  • The Dolans' 71 percent controlling interest makes a hostile bid unlikely, and a sale to Time Warner may be complicated by the family's desire to take the company private.
  • Industry executives warn that taking on Cablevision's 3 million customers in the metropolitan area may be too great a challenge for Time Warner, which has 1.4 million cable subscribers in the same area.
  • Time Warner's acquisition of Adelphia Communications is still pending and may complicate a bid for Cablevision, according to analysts.
  • Analysts Jessica Reif Cohen of Merrill Lynch and Richard Greenfield of Fulcrum Global Partners question the value of the Dolan family's bid, suggesting that Cablevision may be undervalued and that the family may be attempting to take advantage of a future sale.
  • Analyst Alan Bezoza of Friedman, Billings, Ramsey & Co. suggests that while the overall offering price may be fair, the value of the Rainbow spin-off may be lowered, and the cash portion of the bid may be increased.

Statistics:

  • Cablevision Systems Corp. has 3 million customers in the metropolitan area (according to the article).
  • Time Warner has 1.4 million cable subscribers in the metropolitan area (according to the article).
  • The Dolan family's offer to pay public shareholders $7.9 billion (according to the article).
  • Cablevision's stock price rose by 29 cents per share to $32.29 (according to the article).
  • The estimated value of the Dolan family's bid is $33.50 per share (according to analyst Jessica Reif Cohen).
  • Cablevision's forecast for growth is 2 percent (according to analyst Aryeh Bourkoff).
  • Analyst Alan Bezoza suggests that Cablevision's cable TV subscriber levels may grow 4.9 percent this year (according to the article).

Sources:

  • Newsday, "Time Warner Considers Bid for Cablevision", Jun. 22.
  • Merrill Lynch, research note by Jessica Reif Cohen.
  • Fulcrum Global Partners, research note by Richard Greenfield.
  • UBS, research report by Aryeh Bourkoff.
  • Friedman, Billings, Ramsey & Co., research report by Alan Bezoza.