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If you're Christmas shopping this year and have maybe as much as $7 billion or so to spend, you may want to call Chuck and Jim Dolan. The father-son team runs Cablevision Systems, the nation's eighth-largest cable operator with nearly 4 million subscribers. Word around the media world these days is that Cablevision, which also owns a controlling interest in a programming unit called Rainbow Media, is shopping Rainbow around. Asking price: well to the north of $5 billion.
Rainbow boasts two of the cable world's middle-rung cable channels: AMC (American Movie Classics), which can be seen in about 73 million homes, and Bravo, which is in about 50 million homes, according to the National Cable Television Assn. Rainbow also owns the much smaller Independent Film Channel; MuchMusic USA, a startup rival to MTV; and a half-interest in the Fox Sports network, which has 22 regional sports channels across the country. In its most recent filing, Cablevision said Rainbow had revenue of $998 million and earnings of more than $170 million.
CHANGE OF PLANS. Only a month ago, Cablevision was contemplating issuing a separate tracking stock for Rainbow and had turned down offers from several buyers, including both USA Networks and the MGM studio, for its 75% stake (NBC owns the remaining 25%). In its most recent offer, MGM said it would pay Cablevision $3.5 billion for a 37.5% stake in the company. That deal broke down over control issues, with the Dolans unwilling to accept MGM running the channel.
Since then, Black Entertainment Television, which has 62 million subscribers for its flagship BET channel, has been sold to Viacom for $3 billion in stock, sharply escalating the prices being cited for Rainbow's worth. That sale is said to have prompted the Dolans to cancel a special Cablevision shareholder meeting that was set to approve the tracking stock. The Dolans are in the process of selling off cable systems to focus their company more sharply on their strongest markets, which are in and around Long Island. The company recently told analysts that they were interested in maximizing Rainbow's value.
LET'S MAKE A DEAL? At least two bidders have already emerged for Rainbow. The leading candidate at the moment appears again to be MGM, which sent a team of dealmakers to New York on Dec. 12 to meet with Cablevision executives. MGM, which recently bought back much of its 4,100-title film library from Warner Brothers, has been aggressively looking to expand its ownership of cable channels and holds stakes in 10 channels, including ones in Japan, Australia, and Latin America.
Also said to be in the running is Barry Diller's USA Networks, which on Dec. 8 sold its string of TV stations for $1.1 billion to focus on expanding its ownership of cable channels. Company executives haven't shied away from saying that they would like to own Rainbow and recently have been talking with cable operator Comcast about a joint bid, according to knowledgeable sources.
There are others who would likely join in the bid. Rupert Murdoch, whose News Corp. owns a 50% stake in the Fox Sports channels with Cablevision, has looked at the company, say Wall Street sources. So has Walt Disney Co., which owns ESPN as well as stakes in Lifetime and A&E. John Malone's Liberty Media also is considered a potential buyer, although Malone would likely defer to Diller, in whose company Liberty owns a large stake. And NBC may want to expand its 25% stake. None of the companies would comment.
Cablevision officials also would not comment, although one person close to the talks said it was possible that a deal could emerge as early as Dec. 15. Just in time for Christmas gift giving.
Grover, follows the ever-entertaining ways of Hollywood as Los Angeles bureau chief for Business Week Edited by Beth Belton
Copyright 2000, by The McGraw-Hill Companies Inc. All rights reserved.
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