Dan's Papers - October 13, 2006 - Dolans To Try To Make Cablevision Private

Cablevision is back in the news in a big way. The company that powers almost every single television in the Hamptons and was a monopoly here for many years is getting an offer to go private from its biggest shareholders, father and son Charles and James Dolan, who founded the firm. The offer was made to Wall Street as a $19.2 billion leveraged bid for all of the shares of Cablevision.

This is the second time that the Dolan family has made an offer. The last time, one and a half years ago, they were rebuffed.

The company takes in revenue about $4.9 billion a year. The new offer is worth about 15 percent more than the one given a year and a half ago.

Why do the Dolans want to take Cablevision private? The biggest advantage is the difference between short-term thinking and long-term thinking when it comes to how the company is run. Because a public company has a legal responsibility to its shareholders, it is important that as much as humanly possible each business quarter does better then the prior quarter, even if it means that in the long run, the company will do worse. Companies sometimes get themselves into trouble by making poor decisions this way. Also, a private company is not required to disclose its financial documents to the public, only to the IRS. It becomes easier to make decisions. And sometimes one can make long-term decisions that can make earnings fall in the short-run, but in the long run will benefit.

The main disadvantage to a private company is that it is not as easy to raise money by selling shares of its stock to the public. A private company has to raise its money from banks or private investors, which is not as easy.

But the Dolans want the company and analysts say there is a good chance that they are going to get it. Cablevision is not just television, either. The company owns Madison Square Garden in New York City, Radio City Music Hall, the New York Knicks and the New York Rangers. They also own Optimum Online, which is a leading Internet service provider.

The father and son both agree on making the company private.

However, last year, there was a very serious disagreement over a satellite business the company wanted. James voted against his father. This newspaper reported on that issue.

As far as Hampton television viewers go, you don't need to worry. The company is still very much in business. The only change might be that prices go up for the service Cablevision provides in order to pay for the purchase of the company, including the more expensive cost of the loans to leverage the buyout and the more expensive ongoing banking costs to proceed. In fact, you just might want to send them a little extra on your next bill in anticipation of this.

The music, basketball, hockey and boxing fans of the Hamptons also don't need to worry about Madison Square Garden in this deal. The Garden, in a fantastic proposal by others that will be highly beneficial for the Dolans, is expected to be replaced with a brand new arena one block west from its current location to Ninth Avenue in New York City as part of the James A. Farley Post Office renovation. This will create an entirely new multi billion-dollar gateway to New York City. Cablevision has signed a memorandum of understanding that they will do this as part of the deal if the price is right.

And don't worry, the new Madison Square Garden will be up and running before the old one gets torn down so none of the shows and event times will be affected.

According to the Dolans, going private will give them the flexibility they need to compete in the future in the volatile communications market. But others say the change may be a signal that Cablevision will be put up for sale. Other companies such as Time Warner, a regional competitor, might be interested.