Cablevision shareholders rejected the Dolan family’s buyout offer of $36.26 a share in a vote held this morning at the company’s Bethpage headquarters on Long Island, NY.

The Dolans’ privatization bid was worth $10.6 billion in cash, or more than $22 billion including the debt the family would have assumed had their proposal, which was approved by the company’s board of directors, been accepted by shareholders.

The preliminary results of this morning’s vote were announced by Cablevision CEO James Dolan, who read a prepared statement on behalf of the Dolan Family Group, including his father, company founder and chairman Charles Dolan, to the roughly 200 shareholders after this morning’s vote.

Dolans "disappointed"

"While we are disappointed that shareholders did not approve the transaction, there is really nothing negative about today’s outcome," Dolan stated after the vote. "In fact, in many ways, it is a very positive event. We see today’s outcome as a vote of confidence in the prospects of Cablevision, its management team, its 20,000 employees and the industry’s future."

The Dolans’ statement added that Cablevision is "ready to continue as a public company. We are extremely proud of all of our outstanding employees who have maintained their focus on the business. We look forward to continuing our work together to serve our customers, to build on Cablevision’s success and to create value for our shareholders."

No questions asked

Before the Dolan family’s proposal was put to a vote this morning, Jim Dolan told attendees he would not entertain their questions, a refusal that one attendee called "outrageous," according to New York’s Newsday.

This morning’s shareholder rejection caps a two-year attempt by the Dolans to privatize the company. Jim Dolan had stated before the vote he would remain at the company’s helm regardless of today’s outcome.

No tally was given for this morning’s vote, and one may not be available for a few weeks, reports Dow Jones. To have passed, the Dolans’ proposal would have required the support of a majority of shareholders unaffiliated with the Dolans or Cablevision management.

"Over in about 20 minutes"

"It went in favor of long-term shareholders having a stake in the company," Mario Gabelli, Cablevision’s biggest institutional investor (and biggest opponent to the Dolans’ offer), commented after today’s vote to Reuters.

"For the short term it’s hard to know what (the Dolans) will do," he added, "but at some point they’ll have to start running the business in a different way."

"The fact the meeting was over in about 20 minutes indicates the vote wasn’t close," Gabelli’s associate Chris Marangi commented to Bloomberg.

Gabelli and the other non-affiliated shareholders were widely expected to not accept the Dolans’ offer. Institutional investors balked after it was presented in May, despite reported changes of heart in recent days that may have brought the results to a closer vote than anticipated.

11th hour wavering?

The New York Post cited sources this morning indicating some big shareholders may have recently decided to support the Dolans’ $36.26 per share offer, including Harris Associates, Anchor Capital Advisors, Alchem Investment Partners, Marathon Asset Management and T. Rowe Price.

Not wavering, however: ClearBridge Advisors, which holds 13.6% of CVC shares, and Gabelli’s Gamco Investors, which holds 8.3% of the Class A shares.

Gabelli yesterday urged Cablevision to let a court assess its fair value, reports Reuters. As Gabelli told Bloomberg, "The stock will double over the next three to four years without a deal … (and the Dolans) want to buy it on the cheap." He also told the NY Daily News, "we don’t want more money. We want to be part of the buying group."

Gabelli gripes

In a letter to Charles Dolan dated Oct. 8, Gabelli explained why he would reject the offer, citing Verizon’s FiOS inroads on Cablevision turf, and the additional threats of Google, an economic slowdown and "a bidding war for the NY Yankees."

The Wall Street Journal this morning also highlighted Verizon’s "signficant headway" marketing FiOS on Cablevision’s turf as weighing on shareholders’ minds ahead of today’s vote.

Pondering today’s vote, the New York Times wondered if Cablevision shareholders have "dealt themselves a blow" as they’re not likely to get a better offer than $36.26 from Time Warner or any other potential buyer. International Business Times echoed that sentiment.

Next steps?

Pali Research analyst Rich Greenfield reiterated his "buy" rating on Cablevision in a note to clients this afternoon, and added that Pali is lowering its estimates "to what we deemed our ‘worse case’ scenario in our 10/17 note: Why We Would Own CVC, Even if the Dolan Offer is about to be Rejected."

Given that Cablevision lowered its own 2007 outlook, Greenfield now feels the Dolans have a number of options as they move forward:

• sell non-core assets including Rainbow Media’s AMC, WE and IFC channels;
• buy a stake in the YES Network;
• issue a big year-end dividend;
• bid for wireless spectrum in the FCC’s upcoming 700 MHz auctions;
• clarify its Madison Square Garden holding in light of New York State’s Penn Station redevelopment proposal that would allow Cablevision to move MSG;
• and — an option Greenfield calls "unlikely, but always … a possiblity" — sell Cablevision to Time Warner Cable.

Greenfield sees the sale of assets and issuing a dividend as more probable moves.

Hitting Rewind

One move Cablevision did make today: asking a federal appeals court to overturn a lower court ruling in March that halted its planned network-based or remote-storage DVR technology.

Attorney Jeffrey Lamken, representing Cablevision, argued before the 2nd Circuit Court of Appeals that the company’s planned RS-DVR doesn’t differ from a standard DVR set-top cable box, reports Dow Jones.

"It makes one copy just like a standard DVR," Lamken stated.

Robert Alan Garrett, representing the studios and networks (including ABC, CBS, NBC, Turner’s CNN and Cartoon Network) opposing Cablevision’s plan, countered in his arguments that RS-DVR recordings each constitute a separate public performance under federal copyright laws, so studios and content-owners should be able to seek additional licensing fees.

"We continue to believe that remote-storage DVR is a technology that holds real benefits for consumers," Cablevision spokesman Jim Maiella said in a statement.

Fall doldrums

In addition to today’s shareholder rejection, the Dolans have experienced other setbacks this month.

Cablevision, including Jim Dolan personally and the company’s Madison Square Garden unit, must pay $11.6 million in damages to Anucha Browne Sanders, a former SVP of marketing for the New York Knicks who prevailed in her sexual harassment suit in a ruling handed down Oct. 2.

Also, the Connecticut Department of Public Utility last week ruled that Cablevision cannot prohibit local access producers from making their programming available to other cable or video providers.

The Daily


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