Cablevision Systems Corp. said Wednesday that it was wading deeper into the cable programming business by buying the Sundance Channel from its famous co-founder, Robert Redford, and two media companies for $496 million.
The move surprised some analysts because Bethpage, N.Y.-based Cablevision, through its Rainbow Media Holdings subsidiary, already owns two movie channels -- AMC and the Independent Film Channel -- in addition to WE tv, a channel aimed at women. Some investors had wanted the family-controlled cable systems operator to use its cash to buy back shares.
The Sundance Channel, which is available in about 30 million homes, has carved out a small niche with independent films, documentaries and such programming as "The Green" and "Iconoclasts."
Cablevision said it planned to continue operating the channels independently but could achieve savings by combining some of their support services. The company recently made a bid for Newsday, the Long Island newspaper owned by Tribune Co., parent of the Los Angeles Times.
Launched in 1996, the Sundance Channel lacked enough muscle to expand its reach in an effort to grow revenue. It was not a priority for the competing broadcasting companies that owned it, NBC Universal and CBS Corp.
NBC and CBS had conversations about buying each other's interest but never came to terms, one company insider said. NBC Universal owned 57%, CBS held 37% through its Showtime Networks and entities controlled by Redford owned the remaining 6%.
The sale was structured, in large part, as a tax-free exchange of shares of General Electric Co., the parent of NBC Universal. Cablevision plans to return to GE the 12.7 million shares it acquired in 2002 in exchange for the cable company's stake in Bravo, a channel now solely owned by NBC Universal.
Because those shares are worth more than NBC's interest in Sundance, GE also will provide cash to Cablevision, which will be used to help pay CBS and Redford.
Cablevision, which provides cable service for 3 million subscribers in the New York metropolitan area, also owns Madison Square Garden and sports teams including the New York Knicks and the New York Rangers.
"Sundance Channel has already established its own distinct voice through impressive programming like 'The Green' and 'Iconoclasts' and our vision is to build on this type of original content," Rainbow Media Chief Executive Joshua Sapan said in a statement.
Analyst Craig Moffett of Sanford C. Bernstein wrote in a report that the price for Sundance seemed lower than that of other recent cable channel sales based on cash-flow multiples.