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Cablevision Jumps After Creating Rainbow Media Tracking Stock

The move is seen as a precursor to Cablevision selling a portion of Rainbow to the public.
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Shares in

Cablevision Systems


rose Wednesday after the company said it would create a new tracking stock for

Rainbow Media

, its programming and entertainment arm.

The move is seen as a precursor to Cablevision selling a portion of Rainbow to the public. Michael Goodman, senior analyst at

Yankee Group

in Boston, said the announcement isn't entirely surprising, as Cablevision recently gained a favorable tax ruling on a spinoff of Rainbow Media.

Cablevision's stock was up 3, or 4%, to 78 9/16 by midmorning Wednesday. (Cablevision closed up 1 11/16, or 2%, to 77 1/4.)

Rainbow Media owns such cable properties as

American Movie Classics



, the

Independent Film Channel

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, a cluster of regional sports channels and the


network, a New York sports channel.

The unit also includes the

New York Knicks

, the

New York Rangers

and the storied sports arena

Madison Square Garden


"We continue to believe that Cablevision's programming and entertainment assets have value that is not fully recognized by the marketplace," said James L. Dolan, Cablevision's president and CEO, in a statement. "Our programming and entertainment businesses continue to achieve strong revenue and cash flow growth and we believe the tracking stock could provide an attractive new currency to generate continued growth.''

Goodman said a tracking stock would enable investors to evaluate the company much more easily. "Before, Rainbow Media's numbers were buried in Cablevision's books," he said. Goodman added that by creating a tracking stock for the valuable programming and entertainment assets, Cablevision is likely looking to raise the value of the overall company.

Boston-based Yankee Group does not do any investment banking nor does it rate stocks.

While Rainbow's new tracking shares will be traded separately, Rainbow will continue to be a part of Cablevision and remain under the oversight of Cablevision's board. A tracking stock is a separate class of stock that reflects the performance of a designated set of assets of a company.

The move comes as Cablevision has focused more on its cable assets in the New York area. Earlier this month, the company reached an

agreement to sell its Cleveland cable system to

Adelphia Communications


for $1.53 billion in cash and stock. The company is shopping its Boston and Kalamazoo, Mich., systems as well.

Bethpage, N.Y.-based Cablevision said it expects to issue the tracking stock in two new classes of stock, which would generally mirror the current company class A and class B structure.

The cable giant said it has yet to decide which specific programming and entertainment assets it will include in the tracking stock and how the shares will be distributed. It plans to make those decisions in "the coming months."

The issuance of a tracking stock will require a vote of shareholders of each class of Cablevision stock, including




, whose Internet unit owns roughly 33% of Cablevision.

Cablevision owns 75% of Rainbow Media. The remaining 25% is owned by


, a unit of

General Electric



Cablevision said it expects the new securities to be issued in mid-2000.