June 15, 2010

Street Views of Cablevision's Move West

By Amy Maclean

• “Yesterday Cablevision’s management disclosed certain additional details regarding the acquisition of Bresnan. We no longer view the deal to be the (relatively small) negative we originally did. Instead, we now believe the deal is a modest positive,” said Sanford Bernstein, pointing to how the unadjusted 8.3x EBITDA price for Bresnan drops to 6.5x after taking into account tax benefits.

• “While the Bresnan systems represent a departure from the Dolan family's focus on the New York City market, it reflects a reinvestment in cable broadband—the Company's forte. While true that the Dolan's have made some questionable acquisitions outside the cable system business (notably the purchase of Newsday which they subsequently wrote-down), the company's track record in cable operations is stellar,” said Collins Stewart, which believes it is the latest step in a long-term strategy to privatize cable operations.

• "Although the company is paying a healthy premium for an already well-run collection assets, and may have postponed a prospective upgrade of its ratings by undertaking the share buyback program at the same time, strong operating performance continues to bode well for further credit enhancements over the next two years," said a report from Moody’s Investor Services, which said CVC ratings should not be impacted.

• “We are, frankly, a bit surprised at the stock's strength given relatively little detail provided on this call.  We think investors are reacting to CVC's commentary surrounding i) their intent to utilize the buyback, ii) there are no other deals in the works, iii) there should be upside resulting from increasing market share/penetration v. DBS, iv) there is no telco competition (which we already knew but it was highlighted), v) this deal represents no financial downside to investors, vi) CVC programming rates will apply and vii) Bresnan seems to be the ‘CVC of the Upper West,’” Wells Fargo said.

• “Cablevision is buying Bresnan Communications for an estimated 8.19x ‘10E OCF or $4,550/subscriber. Using those metrics, we apply other cable operators’ OCF and subs to find, on average, a 111% potential increase on OCF or 115% on a per-sub basis. Private markets and managements are still valuing cable assets much higher than the public markets; we highlight this deal as a buying opportunity for the sector,” concluded Miller Tabak, which rates CVC “buy.”