Cablevision (CVC) Conundrum

The list of investors who believe that the founding Dolan family is offering too little to take Cablevision private (NYSE:CVC) is fairly long. According to Barron’s, it includes large shareholders T Rowe Price and Gamco. Mario Gabelli, the head of Gamco, believes that the cable company is worth $51 a share. The stock trades near $36, very close to the $36.26 that the Dolans offered. But, in the months immediately before Cablevision’s board was asked to evaluate the Dolan deal, the shares traded between $30 and $32.

The Gabelli break-up model for Cablevision yields a value-per-share of $48, or 33% more than where the stock is now. But, the number is a pipe dream.

If Cablevision is worth substantially more that the Dolans are willing to pay, it would seem almost certain that a private equity firm or one of the two largest cable companies, Comcast (CMCSA) and Times Warner Cable (TWC) would make an offer. No such alternate offer has emerged.

And, then there is the question of whether Wall St. has been efficient in valuing cable companies in general. Over the last six months, Cablevision’s shares are up over 25%. Before the Dolan offer, that number was over 15%, During the same period, Comcast’s shares are down about 1% and Time Warner Cable is off about 8% (TWC did not trade as a public company until four months ago). Granted, the companies have different balance sheet ratios, but these are not great enough to account for the disparity in stock price performance. At Gabelli’s valuation, Cablevision stock would be up closer to 50% over the last six months compared to the flat performances of its two closest rivals.

Wall St. may think that Cablevision is being stolen by the Dolans, but, if so, it is very odd that no one else has stepped forward.

Douglas A. McIntyre