Cablevision Returns to Buying Binge

Like Bill Bennett at a video poker machine, Cablevision (CVC Quote) is having a tough time keeping its money inside its wallet.

The New York-based cable operator, which has spent the last few months trying to convince Wall Street it won't spend beyond its means, said Monday it would spend $500 million -- at least half of that in cash -- to buy out Metro-Goldwyn-Mayer's (MGM Quote) minority stake in three of Cablevision's national program networks.

The deal for AMC, IFC and WE: Women's Entertainment appears to position both Cablevision and MGM for their separate attempts to get a piece of the U.S. entertainment assets put on the auction block by Vivendi Universal (V Quote).

But the news that Cablevision is a buyer instead of a seller -- even in a deal that analysts say favors Cablevision -- indicates once again that the Dolan family that runs Cablevision is not easily scared off its leveraged ways. Though the company's stock has been on a healthy tear lately, having more than quadrupled off last year's lows as liquidity worries eased, any indication of slippage could bring those worries to the fore again.

Shares in Cablevision rose 4 cents Monday to $21.15.

Buying Spree

Cablevision will pay MGM $250 million in cash on closing of the transaction, and five months later pay an additional $250 million in Cablevision's choice of either cash or Cablevision stock.

Two sell-side analysts, one following Cablevision and one following MGM, said Monday that Cablevision was getting the better end of the deal. Merrill Lynch's Jessica Reif Cohen, who has a buy rating on Cablevision, said she had valued MGM's 20% stake at $500 million. (A relevant Merrill analyst and Merrill itself own Cablevision shares; Merrill has managed public offerings for both Cablevision and MGM, and has received investment-banking fees from Cablevision in the past 12 months.)

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