The Dolan family, which controls Cablevision Systems through a special class of supervoting stock, has failed in a second attempt to take the New York area cable TV provider private.
In a letter to James Dolan, Cablevision's chief executive, and his father Charles, the chairman, a two-person committee of independent Cablevision directors said the Dolans' revised offer of $30 per share, valuing the company at $8.9 billion, was inadequate.
When the Dolans made their revised offer Friday, they said it represented their final bid, so it seemed all but certain that Cablevision would remain a public company for the time being.
The Dolans control the shareholder vote of Cablevision through a special class of stock, meaning they could quash any competing bid for control, but the committee had a legal obligation to make sure public shareholders would get a fair shake in any going-private transaction.
The two directors, Thomas V. Reifenheiser and John R. Ryan, said in their letter that the offer wouldn't be in the best interest of shareholders and didn't reflect the fair value of the company, which they said was a "best-in-class" operator of cable systems with customers in a highly desirable area around New York City, a sentiment that is shared by many analysts and investors.
An earlier proposal by the Dolans to take the company private was more complicated and involved spinning off a separate publicly traded entity, and there again, the Dolans and the board couldn't agree on valuations.
Cablevision released the letter late Tuesday and said it would have no further comment on the matter.
Skepticism About the Bid
The Dolans originally offered in October to buy out Cablevision's public shareholders for $27 a share, but the stock has been trading above that price since then in anticipation that the Dolans would have to pay a higher premium.
The Dolans finally did raise their bid Friday to $30 per share. Shares of Cablevision were up 10 cents Tuesday to close at $28.49 on the New York Stock Exchange.
The Dolans have also said they would not agree to sell the company to a third party. Since they control the shareholder vote, they could have easily defeated any hostile bid to seize control of the company.
Several analysts were skeptical that the board would accept the Dolan's revised proposal, noting that cable stocks, including Cablevision's were on the rebound. "Do not let Chuck and Jim Dolan steal CVC," Pali Capital analyst Richard Greenfield said in a note to investors on Friday, referring to Cablevision's ticker symbol.
The Dolans' offer for Cablevision may have been done in by the company's own success. After a prolonged slump, the stocks of Cablevision and other cable companies have done well in the past year in large part to the success of offering "triple play" packages of video, high-speed Internet and phone services.
Cablevision itself was a leader in offering triple play bundles, which not only brought in higher-margin businesses but also staved off defections to satellite providers like DirecTV Group Inc. and EchoStar Communications Corp.'s DISH network, which can't offer interactive services the way cable can.
Reifenheiser and Ryan said in their letter that the company was well-equipped to meet competitive challenges and to benefit from its position in the marketplace. The Dolans had argued that being privately held would allow them to have a more entrepreneurial management style without having to meet Wall Street's short-term demands.
The independent committee received financial advice from Lehman Brothers and Morgan Stanley and legal advice from Willkie Farr & Gallagher.