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A group led by Charles and James Dolan has withdrawn a $7.9 billion offer to take Cablevision Systems Corp.’s cable business private and spin off its media holdings, after failing to cut a deal with a two-person special committee appointed by the Bethpage, N.Y., company’s board. Instead, the group recommends that Cablevision “take advantage of the robust credit markets” and pay a $3 billion special dividend to shareholders. Despite the Dolans’ gesture, some industry watchers question whether the strategic jostling is really over. In June, the Dolans put forward a bid they valued at $33.50 per share, including $21 in cash for Cablevision’s cable business and a share of Rainbow Media Holdings. The offer implied a valuation of $12.50 per share for Rainbow Media, which owns Madison Square Garden, the Independent Film Channel and other networks, the New York Knicks and Rangers sports teams, Clearview Cinemas and other assets. At the time of the offer, Cablevision shares jumped from $26 to $27 each to $32 and above. As with other cable stocks, however, Cablevision had pulled back, and traded at $27 to $28 on Monday. The shares dropped roughly $3.50 per share, or more than 12 percent, to the $23 to $24 range when the Dolans pulled the bid. “It could be a negotiating ploy,” said Robert Routh of Jefferies Group Inc. regarding the proposed dividend. Levering up to pay a dividend could prod an interested party, such as Time Warner Inc. or Comcast Corp., to pursue Cablevision sooner rather than later. “A potential purchaser, be it Time Warner or Comcast, would have to assume that debt,” Routh said. “They would be more likely to consider an offer before that dividend than after.” Fulcrum Global Partners LLC analyst Richard Greenfield suggested in a Tuesday note that “it is conceivable the Dolans could try to take the company private again, as the public market price of [Cablevision]‘s shares has dropped notably (could this all be part of the Dolans’ negotiating process?).” Overall media valuations have fallen 10 percent to 15 percent since the Dolans’ offer, according to Fulcrum. As Cablevision’s stock fell, the implied value the market ascribed to Rainbow Media also fell. “We haven’t seen these multiples since before Bill Gates put money in Comcast in the mid ’90s,” Routh added. “Either the industry isn’t going to grow, which I don’t believe, or the stocks have bottomed, which I do believe.” A $3 billion dividend would come to about $10 per share. “That’s been pretty popular with shareholders in the telecom space,” said Andrew Lipman of the Washington, D.C., law firm Swidler Berlin of a special dividend. Stamford, Conn.-based rural operator Citizens Communications Inc. significantly improved its multiples after announcing a one-time payment to shareholders and a healthy ongoing dividend in 2004. Others, such as Commonwealth Telephone Enterprises Inc. of Dallas, Pa., have followed. “It certainly would be a safer move for a board and particularly a special committee,” Lipman said. “There is no assertion that the family group is going to end up in a different situation than other shareholders.” The committee’s advisers are Lehman Brothers Inc., Morgan Stanley and Willkie Farr & Gallagher. The Dolans retained Merrill Lynch & Co., Banc of America Securities LLC and Debevoise & Plimpton. Copyright �2005 TDD, LLC. All rights reserved.

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