Cablevision May Sell Rainbow Assets in Privatization, Analysts Say
Cablevision is likely trying to sell some of its Rainbow Media programming assets, which include the AMC and IFC movie networks, as part of the proposed privatization by the Dolan family, analysts said. They said an extension Thurs. of bank funding for the Dolan proposal to pay about $5 billion to other shareholders helps prospects for the takeover, which is being considered by a special board committee. Shares of the company had fallen 11% since the Dolan bid was unveiled in June, amid concern the deal might not come to fruition because of weakened cable valuations, among other risks, said analysts including Janco’s Matt Harrigan.
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Rainbow Media could fetch upwards of $4 billion if sold, which would probably be in pieces, said Sanford Bernstein analyst Craig Moffett. “There is likely to be a relatively healthy interest in Rainbow from potential buyers,” said Moffett: “Shareholders would be delighted to see them sold.” Cablevision’s flagging stock price indicates investors are discounting the value of Rainbow, which the Dolans proposed to spin off as part of the cable operator’s privatization, analysts said. “The shareholders have voted with their pocketbooks and pushed the share price down on doubts about the intrinsic value of the Rainbow networks,” said Moffett. Cablevision declined to comment.
“Nobody wants [Rainbow] long term. They want to solidify the value,” said Harrigan. “A couple of years ago I think those networks would have been marquee assets.” Potential acquirers of some or all Rainbow networks include Liberty Media and Discovery, analysts said. “You could argue that there is a fit” between Rainbow and Liberty’s Starz network, Harrigan said. There’s also speculation that the company could sell the real estate under Cablevision’s Madison Square Garden in N.Y.C.
Another reason the sale may be delayed is the Dolans themselves, Moffett said. “As ever with the Dolans, things are always a little more complicated,” he said. “I suspect that they are negotiating down to the last minute, more than price, but also the fundamentals of the deal.” The bank financing deadline had been extended 3 times before it was renewed last week, with a new expiration of Nov. 14, wrote UBS analyst Aryeh Bourkoff in a client note. Under the sale plan, Cablevision debt would rise 58% at year-end to $12.5 billion from a previous forecast, Bourkoff said when the proposal was made public (CD June 21 p5). “The potential sale of the Cablevision Rainbow assets - all or a portion - could help the company alleviate leverage,” wrote Bourkoff. It “could provide incremental comfort to the banks as final financing terms become set.”