Cable Operators

MSG Spin Will Aid Cablevision

1/17/2010 2:00 AM Eastern

Cablevision Systems' board of directors set Feb. 9 as the date for the planned spin-off of its Madison Square Garden assets, the company said last week.

Cablevision first announced its plan to spin off the unit in July, including its Madison Square Garden arena, its professional sports teams, Radio City Music Hall, the Beacon Theater and the Chicago Theater, its MSG regional sports networks and cable music channel Fuse.

According to Cablevision, on Feb. 9, shareholders of record as of Jan. 25 will receive one share of MSG Class-A common stock for every four shares of Cablevision Class-A common stock they hold.

MSG stock is expected to begin trading on a “when-issued” basis on the NASDAQ under the symbol “MSGNV” beginning on Jan. 25 and will begin trading regularly on Feb. 10, under the symbol “MSG.”

“We are now one step closer toward our goal of creating two distinct companies for investors, each leaders in their industry with their own defined business focus and clear investment characteristics,” Cablevision CEO James Dolan said in a statement.

Dolan, who will remain CEO of Cablevision, will assume the role of executive chairman of MSG after the spin is complete. Cablevision vice chairman Hank Ratner will add the title of president and CEO of MSG after the spin.

The spin should make Cablevision a purer-play cable company — it will consist of the cable operations and its Rainbow Media programming arm after the spin. And it will remove some potentially draining assets from the mix: Madison Square Garden is scheduled for a major renovation over the next several years.

“Nearly every operational [Cablevision] metric improves with the spin out of MSG,” Collins Stewart media analyst Tom Eagan wrote in a research note last week.

He estimated that without MSG, Cablevision's 2010 cash flow margin would rise to 38.2% from 33.8%; 2010 cash flow growth rises to 6.4% from 5.3%; and assuming that capital expenditures for MSG amount to $275 million in 2010, free cash flow yield would increase to 10.5% from 6.8%.

September