Cablevision Holds Up on Rainbow Unit

In the face of a spirited bidding war for its four national cable TV channels, Cablevision Systems Corp. said Wednesday it would postpone for a third time a stockholders meeting to vote on whether to spin off its programming unit, Rainbow Media Group.

Cablevision, New York City’s largest cable television operator, rescheduled the meeting for Feb. 2 to give bidders more time to finalize their offers for Rainbow’s four channels--Bravo, Women’s Entertainment, International Film Channel and American Movie Classics.

USA Networks has been the top contender with a bid of $4 billion, but other suitors have stepped up in recent weeks, including Viacom, NBC and Time Warner, said sources close to the situation. Cablevision has asked the four companies to submit final bids by Jan. 16 and expects to make a determination by the third week of January, the sources said.

The Dolan family, which controls Cablevision, has gotten cold feet several times before, but sources said the company is more likely to go through with a sale this time. Cablevision had planned to spin off Rainbow as a separate, publicly traded company last month, but put those plans on hold because of interest from suitors including Comcast Corp., the nation’s third-largest cable operator, and Liberty Media Corp., the investment company controlled by cable mogul John Malone.

Cablevision is interested in selling its national cable channels to concentrate on its core business in New York, where it has 2.8 million cable subscribers and owns entertainment assets such as Radio City Music Hall, the New York Rangers hockey team, the Knicks basketball team and the Wiz retail electronics chain.

The Dolans, like many other cable programmers, are licking their chops after the recent $3-billion sale of Black Entertainment Television, which is being acquired by Viacom Inc.

In a sign that the Dolans are now serious about selling, the family hired two investment bankers this week to hold a formal auction after attempting last month to do the deal on their own. Merrill Lynch and Bear Stearns are running the auction, and Cablevision is demanding that $700 million of the purchase price be in cash and the remainder in stock.

The strength and stability of the bidders’ stock likely will determine the winner because the bids are expected to be close in value. USA Networks Chairman Barry Diller has submitted an offer of $4 billion, though he still lacks the approval of his two largest shareholders, Vivendi and Liberty Media, to proceed.

USA’s bid could be challenged by that of General Electric Corp., which already owns a 25% stake in Rainbow through its NBC unit. Although GE was not a early bidder, the company recently came in with a bid that values the four channels at $3.8 billion. Viacom’s bid now stands at $3.9 billion. It is unclear what Time Warner has bid.

Comcast withdrew shortly before Christmas and is concentrating on buying some or all of AT&T;’s cable assets.

Analysts say Diller wants the assets more than the other companies do and may be willing to pay more. Viacom has bought three major cable channels in the last year: the TNN and Country Music Television channels acquired in the CBS purchase, as well as BET. Analysts say Rainbow’s channels have potential because they only recently became big enough to attract national advertising.

While NBC has been on the sidelines of a decade-long media consolidation, GE may be opening the purse strings because of new accounting rules that make acquisitions less of a strain on earnings. Such an acquisition would mark the first time GE has used its own stock to expand NBC since the purchase of RCA.

Cablevision shares fell 13 cents on Wednesday to $81.81 on the New York Stock Exchange.