Cablevision Rejects Dolans' Bid As Too Low

Do the Dolans want to buy Cablevision Systems on the cheap?

Investors believe so. Led by rebel major shareholder Mario Gabelli, whose Gamco Investors holds 8.3% of Class A shares of Cablevision, investors roundly rejected the Dolans' $10.6 billion offer.

Gabelli and others believe the company is worth at least $17 billion. Gabelli has said the Dolans want to buy the company for less.

The Dolans' move comes at a time when media stocks are getting hammered amid the gyrations of the stock market and a questionable economy. Most recently, the company noted that new business has been slowing--specifically the triple-play package of services: video, Internet and land-line telephone.

In addition, competitors such as Verizon Communications and its FiOS TV programming service have been making inroads into established cable operators' territories. FiOS is now in 17% of Cablevision's operating territory. The Dolans have addressed the Verizon issue with analysts in the last few fiscal reporting periods.

"Verizon is spending between $80 million and $100 million a year [in marketing]," Tom Rutledge, Cablevision's chief operating officer, told analysts in August. "We have upped our marketing spending so our position doesn't get drowned out by that marketing."

The Dolans believe they would do a better job by taking the company private--out of the glare of the public company spotlight. The Dolans --CEO James Dolan and Chairman Charles Dolan--have tried to buy Cablevision for the past two years.

The $36.26-a-share bid hasn't responded in the marketplace. Late on Wednesday, Cablevision's stock was down nearly 3% to $31.00.

One of Gabelli's points of contention is the value of Madison Square Garden--a major piece, almost 50% of the overall deal--which the Dolans peg at $4.8 billion. Gabelli believes it is worth much more.

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