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Dolan: Sale 'Less Likely’

9/19/2008 8:00 PM Eastern

Cablevision Systems CEO James Dolan squashed any investor hopes that it would sell off its Rainbow Media Holdings programming unit any time soon, telling an audience at an investor conference last week that it was “less likely” — given the state of the credit markets — that the MSO would sell assets in the near term.

Dolan’s comments came during a rough week for the stock market as turmoil in the financial sector sent the Dow Jones Industrial Average on a virtual roller coaster, plunging more than 800 points in the first three days of the week before rallying in the remaining days to finish down just 34 points. Cablevision’s stock rode an equally volatile wave: It finished the week down about $2.25 to $27.53 per share but had been as low as $25.39 per share earlier in the week.

Analysts and investors have expected Cablevision to sell assets ever since Dolan said on Cablevision’s second-quarter earnings conference call on July 30 that the company was investigating alternatives to boost shareholder value. Since then, the company has authorized management to investigate a share repurchase, a dividend, and asset sales as possible alternatives. Cablevision’s board of directors authorized a 10-cent-per-share dividend on Aug. 15.

At the Goldman Sachs Communacopia conference last Thursday, Dolan said that, if the company were to sell assets, it would probably be the “developed mature cable networks,” which likely means its Rainbow Media Holdings unit, including AMC, IFC and WE TV.

But when asked if it was the right time to sell cable networks, Dolan replied: “I think the shutdown of the credit markets makes the purchase of assets and the sale of assets less likely.”

Asked what he would do with the proceeds of any sale if the market conditions were right, Dolan said that paying down debt would be the likely course.

“Today, you need to be concerned about your debt first,” he said, adding that Cablevision has sufficient cash and credit lines to service its debt.

“The company can handle its maturities,” he said. “We don’t need to go back to the credit markets.”

This was the second investor conference Dolan has presented at — his first was the Merrill Lynch Fall Media Preview earlier this month in Marina Del Rey, Calif. — in about two years. Dolan said that drought was mainly because the company has been in the middle of several going-private attempts in that timeframe and was restricted as to what it could say to investors during that process.

“We weren’t in the position to do a lot of outreach,” he said, adding that, since then, company management has been re-strategizing the company from one that was expected to be highly leveraged (if the privatization was approved) to one that is expected to generate significant free cash flow in the coming year.

Dolan assured the audience that his family is not likely to try the privatization route again anytime soon.

“I would never completely rule it out, but at this time, it is not on our radar screen,” Dolan said of privatization.

In a research note, Pali Research analyst Richard Greenfield wrote that, while he still believes Cablevision is actively soliciting bids for the networks, the current market conditions are likely to slow that process. But he added that the key takeaway from Dolan’s comments is that the family doesn’t “appear to have any interest in using the company’s balance sheet to pursue their entrepreneurial pursuits (such as Newsday, Sundance, live entertainment); rather, they appear squarely focused on shareholder-friendly actions (and will be far more open to a regular dialogue with investors).”

 

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