Cablevision to Buy 10 New York Systems
Cablevision Systems Corp. is increasing its presence in the New York area with the purchase of 10 cable systems from Tele-Communications Inc. The systems serve 820,000 customers in the nation’s biggest media market.
TCI, the country’s largest cable operator, will be paid in Cablevision stock, giving it a 33% stake in the company. The deal will expand Cablevision’s reach in the New York metropolitan region to more than 2.5 million subscribers from 1.7 million.
The 10 TCI systems would give Cablevision greater size and scope as well as more than $200 million a year in additional cash flow.
Within the next two years, Cablevision plans to roll out more than 100 channels on its New York-area systems, a regional programming package, continued advances in telephone and Internet data transmission, video on demand and the MSG Network on high-definition television.
Cablevision shares soared 28% on the news.
“There will be intense competition to provide the next generation of programming and services to the tri-state area,” James Dolan, Cablevision’s chief executive, said in a statement.
Competitor Time Warner Inc., the nation’s No. 2 cable company, has 1.1 million subscribers in New York City. The systems Cablevision is buying are in New Jersey, Long Island and New York’s Rockland and Westchester counties. Cablevision is based in Woodbury on Long Island.
Englewood, Colo.-based TCI would receive about 12.2 million Cablevision Class A shares.
Cablevision would assume about $669 million of TCI debt with the systems.
Cablevision rose $9.75 to close at $44.375 on Amex; TCI climbed $1 to close at $16.06 on Nasdaq.
“This agreement brings tremendous long-term value to both companies,” TCI President Leo Hindery said. “Cablevision significantly enhances its presence in the country’s largest and most important media market. At the same time, TCI becomes an investor in one of the country’s leading telecommunications, sports and entertainment companies.”
In early March, Cablevision, the nation’s sixth-largest cable company, announced a deal to take control of the Madison Square Garden arena, the New York Knicks, the New York Rangers and the MSG television network through a buyout of partner ITT Corp.
Despite TCI’s large stake, Cablevision would continue to be controlled by Dolan family interests. TCI would receive two seats on Cablevision’s board of directors as part of the deal.