• by Wayne Friedman , June 14, 2010

Looking to move beyond its mostly East Coast businesses, the U.S.' fifth-largest cable operator, Cablevision Systems, announced that it is planning to purchase Bresnan Communications for $1.365 billion. Shareholders initially did not seem to like the news.

The purchase for the cable operator's Colorado, Montana, Wyoming and Utah systems -- amounting to 300,000 subscribers -- was at a 8.3 times cash flow multiple, a bit steep according to stock market researchers. During mid-day trading, Cablevision's shares were down 2%.

Cablevision will pay about $1 billion in debt and make an equity investment of less than $400 million.

Craig Moffett, cable analyst at Sanford C. Bernstein & Co., had said the Bresnan deal "is not what investors had in mind." Many will be frustrated that the company did not use its financial resources to acquire more shares of Cablevision itself -- for far less money.

The company's earlier acquisition of Newsday did not supply the hoped-for synergies.

Other analysts believe Cablevision should be sticking with boosting existing new growth businesses: phone, Internet and new video platforms.

Soon after the initial deal was announced, Cablevision's stock took off -- rising 6% to $24.78 a share. Helping to buffet the Bresnan news, Cablevision's board of directors approved a $500 million stock repurchase plan.