One of the best-run and most successful cable companies in the country is going private after a two-year effort by the founding family to buy the company. (The Deal Blog has a great recap of the efforts by the Dolan family to take the company private, although some of the numbers seem off.)
The Dolans’ latest bid of $10.6 billion translates into $26.26 per share, an 11% premium over the company’s closing price yesterday. Including the assumption of debt, the deal is reportedly worth about $22 billion. Reports say that the Dolans — father Chuck founded the company and his son, Jimmy, currently runs it — want the hundreds of millions in annual cash the company spins off, and that’s true.
But, the real impetus, the factor that has driven other formerly publicly traded cable companies such as Cox Communications to go private, is the fact that Wall Street simply fails to value the cable industry. Cablevision’s stock, like that of other cable companies, has languished. Investors fear increased competition to cable from phone companies (and lately the Internet) and have backed away from cable, despite phenomenal growth in the industry’s high-speed data, telephony and digital cable customer counts.
At the end of 2006, Cablevision had 3.127 million subscribers (the company reports its Q1 07 earnings tomorrow) which gives the deal a value of around $7,035 per subscriber assuming total deal value of $22 billion, which equates to 13 times annual cash flow per subscriber (around $542 using latest data). In contrast, Comcast recently purchased Patriot Media for around $6,000 per subscriber, a deal worth about 10 to 11 times per subscriber cash flow for that company.
We’ll get a better fix on the buyout and the values per subscriber tomorrow when Cablevision reports its earnings. But, from the sounds of it, investors are getting top dollar for the company and the Dolan family is getting a cash-generating machine.
Cynthia Brumfield at 9:52 AM|Comments(0)
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