bloggingbuyouts

Rainbow Media Holdings, a Cablevision Systems Corporation (NYSE: CVC) programming subsidiary, announced today that it will acquire 100% ownership of the Sundance Channel. Sundance is currently owned by NBC Universal, which is owned General Electric (NYSE: GE), and Showtime Networks, which is owned by CBS Corporation (NYSE: CBS), as well as various entities controlled by Robert Redford.

The exchange will be valued at approximately $496 million and consists of a tax-free exchange of 12.7 million GE shares held by Rainbow and given to General Electric and cash given to CBS and Redford entities for their interests.

Sundance began in 1996 under the direction of Robert Redford, with the goal of creating a channel that brings dedicated viewers while promoting artistic freedom of expression through various films, series, and documentaries. It now reaches some 30 million subscribers and with the acquisition, Sundance will join Rainbow's portfolio of channels, including AMC, IFC and WE.

Jon Ogg produces and edits the Special Situation newsletter for 247WallSt.com.

The Dolan family's buyout of Cablevision Systems Corp. (NYSE: CVC) has hit yet another snag. Earlier this week, Doug McIntyre wrote about opposition to the deal from legendary manager Mario Gabelli, whose funds own 8% of Cablevision stock. Gabelli is arguing that at $36.26, the value offered in the deal, Cablevision shares are undervalued. He thinks the shares are actually worth $50 or more and is trying to get the Dolans to increase their $10.6 billion dollar deal accordingly.

Now comes the news that the largest institutional shareholder in Cablevision, ClearBridge Advisors, may also oppose the deal. ClearBridge owns 31.4 million shares, or 13.6% of Cablevision. ClearBridge's opposition should be enough to reject the offer.

A report in The New York Times suggests that ClearBridge may be playing a game of chicken with the Dolans. At $36.26 per share, ClearBridge would make money on the deal; it just wants to make even more. But so far, the game isn't working. Last night, James Dolan, Cablevision's CEO, released a statement saying the family would not increase the value of its buyout offer.

The vote on the deal is scheduled for October 24.

Legendary fund manager Mario Gabelli thinks that price for the Cablevision Systems Corp. (NYSE: CVC) buyout is way too low, and he has some independent backing. According to The Wall Street Journal, ISS Governance Services, one of the leading proxy advisory firms to institutional investors, said in a report Friday that "the theoretical target price for Cablevision, by a number of analysts, is much higher than the current offer price."

Gabelli's funds own over 8% of Cablevision. While the company's shares trade below $35, Gabelli says they are worth $50.

The fight between the powerful fund manager and the Dolan family, which founded Cablevision and plans to take it private, is going to get messy and will probably end up in court. Gabelli probably has one of two goals in pushing the Dolans on the deal's price. The first would be to get them to increase their buyout offer. The other would be to bring a third party like Comcast Corp. (NASDAQ: CMCSA) to the table to make a higher bid of its own.

The Dolans have tried to take the company private twice before. Each time the deal has floundered on price.

The founding family may have a card up its sleeve. The value of cable companies has fallen sharply in recent months on increased competition from satellite TV and broadband and video offerings from the big telecom companies. Shares in Comcast have fallen from $30 earlier this year to $24.

For the Dolans, an interesting defense of their bid goes like this: the value of cable companies is falling, so actually we are overpaying to take our company private.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Tribune Co. (NYSE: TRB) closed at $28.12. Sam Zell announced on April 2, 2007 that his group would pay TRB shareholders $34 per share. The closing has been expected to occur in the fourth quarter of 2007. Alex Brown said on October 2, "We continue to believe the transaction will close successfully, and reiterate our Buy rating and $34 price target." TRB November option implied volatility of 44 is above its 26-week average of 25 according to Track Data, suggesting larger price risks.

Cablevision Systems Corp. (NYSE: CVC), a leading entertainment and communications company controlled by the Dolan family, closed at $34.79. The Dolan family's proposal of taking CVC private at $36.26 a share will be voted on at special meeting of CVC shareholders on October 24. CVC has secured board and special committee approval. CVC December call option implied volatility is at 19; puts are at 23, near its 26-week average of 23 according to Track Data, suggesting non-directional price risks.

Daily M&A Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Just last week, I addressed some of the pending mergers that are being deemed at risk as far as "WILL THEY CLOSE?" and there are still some pretty large spreads between today's stock prices and the implied merger prices. That merger risk-arb is an area that has made fortunes for many funds, and it has led to many a demise. Here are some of the pending deals covered today so you can see where there is risk and where there is opportunity.

Tribune (NYSE:TRB) is perhaps one of the most frequently referred to deals. This is one that we have speculated will have a price cut. After all, would you loan Sam Zell and this company this much money when the media fundamentals are as bad as they are (and they only get worse)? Shareholders have approved the deal, but that was a given. Tribune's $34.00 buyout price has an implied return of over 20% to today's prices of $28.15, but I think a safe bet is for a lower-than-voted-on price.

First Data Corp. (NYSE:FDC) is the one of the biggest mergers pending that is still at risk. First Data is set to receive $34.00, and shares are currently at $32.51. The good news is that this KKR-led deal is MUCH better in risk-arb terms than it was two weeks ago when shares dipped to under $32.00.

Sallie Mae, or SLM Corp. (NYSE:SLM), is really perceived as being at risk. It isn't just the financing being at risk. The regulatory agencies may want this blocked as it is a quasi-agency status. If you don't think a $60.00 buyout price is a risk when the shares are at $49.05 today, then what can be said? J.C. Flowers & Co., Bank of America Corp.(NYSE:BAC) and JPMorgan Chase & Co.(NYSE:JPM), have said that legislation could kill the deal.

Cablevision Systems Corp. (NYSE:CVC) is one that is in Dolan-Hell. The buyout is at $36.26 and shares sit today at $32.30.

TXU Corp. (NYSE:TXU) is the real biggie, and still up in the air. You have to wonder why Warren Buffett wouldn't have stepped in for his WHALE OF A DEAL, particularly since he has telegraphed that he'd like to own utilities. ISS has recommended that shareholders vote in favor of the buyout.

Jon Ogg is a partner in 24/7 Wall St., LLC; he produces the Special Situation Investing Newsletter and does not own securities in the companies he covers.

Cablevision Systems Corp. (NYSE: CVC) -- volatility elevated as arbitrage spread widens. CVC, a leading entertainment & communications company controlled by the Dolan family, is recently down $0.85 to $35.55. The Dolan family is in the process of taking CVC private at $36.25 a share. CVC has secured its board and its special committee approval; however CVC still needs to win the backing of a majority of its public shareholders. Dow Jones reported on 5/2/07, "our position going the whole way back for years on CVC is this: If the Dolans ever were to decide to part with that asset, we would certainly want to be on their list of people to talk to," said Time Warner (NYSE: TWX) Chief Executive Dick Parsons. CVC September option implied volatility of 29 is above its 26-week average of 18 according to Track Data, suggesting larger price risks.

Guitar Center, Inc. (NASDAQ: GTRC) -- volatility flat as arbitrage spread widens. GTRC is recently down $0.52 to $58.33. GTRC announced on 6/27/97 it would be acquired by Bain Capital for $63; the total transaction value is $2.1 billion. GTRC over all option implied volatility of 13 is near its 5-week average according to Track Data, suggesting flat risk.

Daily M&A Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Cablevision Systems Corp. (NYSE: CVC) will be taken private by its founding family, the Dolans. The price for the transaction is $36.26 a share, about a 10% premium over where the stock traded yesterday. It may not be the deal of the century for the Dolans, but it is close. The family has made two other offers, the last one at $30 a share. At this point, the independent board members may be so tired of rejecting and negotiating that they have finally given in.

A look at the stock over the past few months would indicate that the Dolans are getting a deal. In late April, the shares almost reached $33. Assuming no one has been front-running the deal, the $36 and change offer isn't much of a premium.

And the private buyout comes at a time when cable companies are benefiting from the great success of the "triple play" of cable TV, VoIP, and broadband bundled services. Comcast Corp. (NASDAQ: CMCSA) has announced that it added over 500,000 voice subscribers in the last quarter and will hit 7 million in late 2009. That's good for cable and bad for phone companies. Time Warner Inc. (NYSE: TWX) made similar positive comments about its cable operations earlier today. According to MarketWatch: "Total phone subscribers totaled 2.1 million." The VoIP business is only getting better for cable.

The stock performance of Charter Communications (NASDAQ: CHTR) gives some hint about what the market thinks of cable's future. Even though the company has a debt load of over $19 billion, the stock is up over 170% this year.

For the Dolans, it is good to be insiders. As usual.

Douglas A. McIntyre is a partner at 24/7 Wall St.