Cablevision’s spinout of its Rainbow DBS satellite service is on track, but details have changed since the proposal was first floated in March.
The new entity will include DBS and three national cable networks, AMC, The Independent Film Channel and WE:Women’s Entertainment. In addition, the DBS business will offer nationwide service..
Under the original plan, the spin-off would have included DBS, Clearview Cinemas and approximately $450 million in cash from Cablevision. Cablevision would also have retained rights to sell DBS service in New York.
The revised plan was approved by Cablevision’s board of directors this week, according to a regulatory filing.
Cablevision says the move focuses it on regional cable and telecommunications, sports (Madison Square Garden and its teams) and entertainment (Radio City Music Hall, Clearview Cinemas and others). It also helps the company reduce debt.
The company will begin the spin-off process in January by grouping DBS and related businesses together into a separate, semi-autonomous unit. The actual spin-off still depends on a tax ruling from the IRS and several other factors.
Cable industry watchers aren’t sure the swap of the valuable cable networks and Clearview Cinemas, is prudent. Analysts at Credit Suisse First Boston today downgraded the company’s stock from “neutral” to “underperform” following the news. Prudential Securities also took a dim view of the new plan.
Analysts at SG Cowen said the inclusion of the networks will bring cash flow to the new entity and enhance its viability. It may leave Cablevision in position for a merger or acquisition, analysts said.
