It appears to be back to the drawing board -- or perhaps the executive suite -- for Chuck Dolan, Jim Dolan, and any other members of the Cablevision (NYSE:CVC) founding and controlling family who, until this week, had designs on taking the cable operator private. Their effort, which was bushwhacked by a special committee of the company's board, was the second unsuccessful Dolan buyout effort at the company in as many years.
Late Tuesday, a two-person committee of the Cablevision board (made up of Thomas V. Reifenheiser and John R. Ryan) notified CEO Jim Dolan and his father, Chuck, the chairman, that their latest offer -- this one for $30 for each of the shares in the company they did not already own -- was inadequate. The offer, which essentially valued the company at $8.9 billion, had been sweetened on Friday from the $27 per share the Dolans had proposed in October. When they moved to $30, the family indicated that this would be their final offer.
This was actually the Dolans' third offer for the company. In 2005, they offered $21 a share in cash for Cablevision's cable operations, plus an approximately $12.50 public market offering price for the company's other assets, which include the Rainbow Media programming arm, Madison Square Garden, Radio City Music Hall, and the New York Knicks basketball team and Rangers hockey team. The complicated nature of that offer was likely its undoing, and it was eventually rescinded.
The Dolans probably have been both blessed and cursed by the recent success of Cablevision and the other members of the cable fraternity, including Comcast (NASDAQ:CMCSA), Mediacom (NASDAQ:MCCC), Charter Communications (NASDAQ:CHTR), and Time Warner's (NYSE:TWX) soon-to-be-spun-off cable entity. Cablevision's cable franchises include most of Connecticut's affluent Fairfield County, the majority of New York's Westchester County, all of Long Island, and a portion of northern New Jersey.
In the third quarter, the company, which like most of its peers has benefited from its "triple play" offering of digital video, high-speed data, and telephone service, grew its video subscribers by 28.3% year over year and its data customers by 22.7%. It also increased its per-subscriber revenues by 15%. Considering this, just a $3 sweetening of the $27 offer was, as we Texans say, a dog that wouldn't hunt.
Had the Dolans been successful in their efforts, Cablevision would have followed Cox Communications and Insight Communications in shrinking, through privatization, the number of publicly held cable operators. For now, however, Cablevision will remain a key member of a five-company public cable operator grouping. It should also become attractive once more to Foolish investors.
In fact, if you believe in the cable story, think about this: Time Warner, which services virtually all of Manhattan's cable subscribers, is effectively an attractive hot dog surrounded geographically and figuratively by the Cablevision bun. It's long appeared that there could be a most attractive combination there, although it likely would not occur without the Dolans' consent, given their supermajority voting status at Cablevision. But since movements in cable often take longer than is anticipated, Fools would be well advised to remain attentive to the fortunes of Cablevision and its peers.
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Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your questions or comments. The Fool's disclosure policy sometimes stays up late to watch M*A*S*H reruns.
