Family that controls Cablevision proposes to take it private and spin off entertainment unit

Monday, June 20th 2005, 8:30 am

By: News On 6

NEW YORK (AP) _ The family that controls Cablevision Systems Corp. has proposed taking the cable TV operator private while spinning off its entertainment assets, which include the New York Knicks and Rangers, Madison Square Garden and cable channels like American Movie Classics into a separate publicly traded company.

The $7.9 billion deal would give Cablevision stockholders $21 in cash for each share they currently own, plus shares in the new company, Rainbow Media Holdings. Rainbow also would include Cablevision's regional sports networks, Radio City Music Hall and Clearview Cinemas.

The Dolan family, whose leaders have been feuding in recent months, estimated the spinoff of Rainbow would be worth $12.50 per share, giving Cablevision shareholders a combined $33.50 for each Cablevision share, a 25 percent premium over its closing price on Friday.

Cablevision shares jumped $6.38, or 23.7 percent, to $33.25 in premarket trading.

The Bethpage, N.Y.-based company is expected to would create a special committee of independent directors to evaluate the proposal.

In a letter sent Sunday to Cablevision's board, Charles Dolan, the company's chairman and James Dolan, his son and chief executive, said it was necessary to remove the company from the public market's scrutiny to meet the challenges of new technologies and competitors.

Charles Dolan would be chairman of the private cable company; the chief executive would be Thomas Rutledge, currently chief operating officer of Cablevision. James Dolan would be chairman and chief executive of Rainbow.

Charles Dolan, who is considered one of the pioneers of the cable industry, has feuded in recent months with son James over the company's satellite-broadcasting unit called Voom, which delivered high-definition TV channels to customers.

The elder Dolan replaced three board members after they sided with James in deciding to shut down Voom. But the satellite TV service was eventually shut down anyway.

The proposal to take the cable business private comes two weeks after Cablevision succeeded in its battle to block plans for a new stadium on Manhattan's West Side, seen as a competitior to Cablevision's Madison Square Garden property .

Cablevision has been the subject of takeover speculation, with the most likely buyer being New York City-based Time Warner Inc. Cablevision's 3 million customers in the New York City area and technologically advanced cable systems make it an attractive target for such a company.

In the letter sent to the board, the Dolans said they are interested only in the proposed transaction and will not sell their stake in Cablevision Systems.

After the completion of the transactions, the Dolan family group would own all of the Cablevision telecom and cable businesses and approximately 20 percent of Rainbow. The family currently owns supervoting shares representing about 71 percent of the voting power of Cablevision.

``Our proposal offers a substantial premium to Cablevision's public shareholders for the cable and telecom businesses, while enabling shareholders to benefit from unlocking the value of our premier programming, sports and entertainment properties,'' the Dolans said.

``We strongly believe that a long-term, entrepreneurial management perspective _ not constrained by the public markets' tendency to focus on short-term results _ will better enable the cable company to meet its competitive challenges, they wrote.

Despite the turmoil in its boardroom, Cablevision is still regarded as one of the best-run and most desirable cable TV companies in the industry.

It has been one of the most successful at getting customers to sign up for premium services like digital phone, digital cable and high-speed Internet.