Like Bill Bennett at a video poker machine, Cablevision (CVC) 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) 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). 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.
J.P. Morgan analyst Spencer Wang termed the deal "uninspiring" for MGM, noting that the per-subscriber valuation MGM was receiving was lower than the benchmarks set by other recent transactions. Wang, who has an underweight rating on MGM, also pointed out that the $500 million MGM was receiving in this deal plus the $250 million it received earlier from selling its Bravo stake back to Cablevision added up to less than the $825 million MGM had paid for the programming assets in February 2001. (J.P. Morgan has done underwriting for both Cablevision and MGM.)