Shareholders of Cablevision Systems Corp. (NYSE: CVC) must be scratching their heads over the company's $650 million purchase of Newsday from Tribune Co., the latest in a long series of baffling moves by the Dolan family, which controls the New York-based cable company.
The theory -- if you want to call it that -- is that Cablevision would be able to market the newspaper to its customers and that the company would be able to add additional content to its cable news channel. This makes no sense. People have stopped reading newspapers in droves. The only way that they would even consider subscribing is if Cablevision practically gave the newspaper away. Newsday could have struck an alliance with the cable channel to share content without the paper changing hands; these sort of deals happen all of the time.
Maybe advertisers will be more interested in Newsday now that Cablevision will be able to bundle ad space in the paper and its website along with cable commercial time. The problem, though, is that residents in Long Island have a plethora of media choices including the New York Times, New York Daily News and The New York Post. Like the readers, the only way that advertisers that aren't in the newspaper now would consider doing business with Newsday would be with steep discounts.
According to people familiar with the matter, the Wall Street Journal reported that American International Group Inc's (NYSE: AIG) airplane-leasing unit is considering a split from the company. The people said International Lease Finance Corp have grown "increasingly concerned" the company will be hurt by AIG's financial troubles.
Royal Dutch Shell Plc (NYSE: RDS.A) and Spain's Repsol YPF SA (NYSE: REP) are pulling out of one of Iran's biggest gas projects, the $10B-plus development of phase 13 of South Pars, the world's largest gas field, the Financial Times reported.
WEB SITES:
Bloomberg reported that HSBC Holdings Plc (NYSE: HBC) set aside a smaller-than-forecast $3.2B for bad loans in the U.S. The bank also said its Q1 profit was higher than Q107.
The Wall Street Journal, which is owned by News Corp. (NYSE: NWS) is reporting that News Corp. has withdrawn its bid for Newsday (subscription required). Rupert Murdoch's News Corp. was unwilling to match the $650 million bid offered by Cablevision (NYSE: CVC). New York Daily News owner Mort Zuckerman had also bid on Newsday.
Besides being higher, Cablevision's bid is likely to face fewer regulatory hurdles, considering Murdoch's and Zuckerman's New York holdings. But, according to the Journal, the bid could prompt some pushback from investors who question the the strategic rational for the deal. Cablevision could bundle Newsday subscriptions with other broadband and phone services it offers in the New York area.
Tribune Co. (NYSE: TXA), current owner of Newsday, recently reported that first-quarter revenue and circulation was down, as newspapers continue to struggle. Cablevision also reported a first-quarter loss of 11 cents per share.
The exchange will be valued at approximately $496 million and consists of a tax-free exchange of 12.7 million GE shares held by Rainbow and given to General Electric and cash given to CBS and Redford entities for their interests.
Sundance began in 1996 under the direction of Robert Redford, with the goal of creating a channel that brings dedicated viewers while promoting artistic freedom of expression through various films, series, and documentaries. It now reaches some 30 million subscribers and with the acquisition, Sundance will join Rainbow's portfolio of channels, including AMC, IFC and WE.
Jon Ogg produces and edits the Special Situation newsletter for 247WallSt.com.
According to people familiar with the matter, the Wall Street Journal reported that an investor group that includes Harbinger Capital Partners is expected to report a raised stake in The New York Times Company (NYSE: NYT). The raised stake is expected to be close to matching the 19% stake owned by the Sulzberger family.
The Goldman Sachs Group Inc (NYSE: GS) has been spared many of the problems of the subprime mortgage crisis, but other areas where it's involved, such as investment banking and leveraged loans, are hurting the firms profitability, the Wall Street Journal reported.
OTHER PAPERS:
Cablevision Systems Corporation (NYSE: CVC) is seeking to put a valuation on its Rainbow Media unit, in order to possibly sell it, sources say. In the past, the unit, which consists of several cable channels, has been valued at $3B, but the Dolan family is hoping to obtain a higher price, according to the New York Post. Possible buyers include Liberty Media Corporation (NASDAQ: LCAPA) and News Corporation (NYSE: NWS).
Elan Corporation (NYSE: ELN) is considering splitting its biopharmaceuticals arm, which markets Tysabri, from its drug technology division, the Sunday Times noted. The potential spin-off could unlock up to $1.5B to share holders.
Suntrust is positive on FPIC Insurance Group Inc's (NASDAQ: FPIC) valuation and book value growth. The firm initiated shares with a Buy rating and $50 target.
MOST NOTEWORTHY: Siemens , Siliconware Precision and Palm were today's noteworthy upgrades:
Goldman upgraded Siemens AG (NYSE: SI) to Buy from Neutral and views shares as defensive in the current environment.
Merriman upgraded shares of Siliconware Precision (NASDAQ: SPIL) to Buy from Neutral on valuation, as they believe the negative sentiment regarding the U.S. economy is already priced into shares.
JP Morgan upgraded Palm (NASDAQ: PALM) to Overweight from Underweight citing new smart-phone products expected in 2008 and stronger-than-expected Centro sales.
OTHER UPGRADES:
Pep Boys (NYSE: PBY) was raised to Neutral from Underperform at Credit Suisse.
Jefferies upgraded Pioneer Drilling (NYSE: PDC) to Buy from Hold.
Deutsche Bank upgraded Cablevision (NYSE: CVC) to Buy from Hold.
Banks that include Merrill Lynch & Co Inc (NYSE: MER) and The Bear Stearns Companies Inc (NYSE: BSC) are reportedly in talks to help bail out struggling bond insurer ACA Capital Holdings, which lost $1B in the most recent quarter, according to two people briefed on the situation and reported by the New York Times; ACA Capital has guaranteed $26B in mortgage securities.
Executives at Tribune Company (NYSE: TRB) were faced with last-minute questioning from bankers that were reluctant to fund the final portion of the $8.2B deal to take the company private, according to sources close to the company, the Chicago Tribune reported.
WEB SITES:
Barron's Online's "Inside Scoop" reported that analysts are not convinced that the deal with Citadel is enough to save E*Trade Financial Corporation (NASDAQ: ETFC), as it does not eliminate E*Trade's $12.4B second-lien mortgage exposure, and the company could potentially face further customer attrition, which many think will continue to pressure the shares.
MOST NOTEWORTHY: The restaurant sector, American Semiconductor and First Solar were today's noteworthy initiations:
Friedman Billings resumed coverage of Cheesecake Factory (NASDAQ: CAKE) and Yum! Brands (NYSE: YUM) with Outperform ratings and a $30 target and a $46 target and Applebee's (NASDAQ: APPB) with a Market Perform rating and $25.50 target.
American Superconductor (NASDAQ: AMSC) was initiated with a Buy rating and $33 target at Jefferies, as they believe repeat orders for wind turbine electrical systems could drive rapid revenue growth from 2008-2010.
CIBC resumed coverage of First Solar (NASDAQ: FSLR) with a Sector Performer rating, as they believe shares are already pricing in the company's 2009 EPS potential.
OTHER INITIATIONS:
Morgan Stanley resumed coverage of Cablevision (NYSE: CVC) with an Underweight rating.
US Steel (NYSE: X) was initiated with a Sector Performer rating and $117 target at CIBC.
JP Morgan started SunPower (NASDAQ: SPWR) with an Overweight rating and Evergreen Solar (ESLR) with a Neutral rating.
Legendary fund manager Mario Gabelli thinks that price for the Cablevision Systems Corp. (NYSE: CVC) buyout is way too low, and he has some independent backing. According toThe Wall Street Journal,ISS Governance Services, one of the leading proxy advisory firms to institutional investors, said in a report Friday that "the theoretical target price for Cablevision, by a number of analysts, is much higher than the current offer price."
Gabelli's funds own over 8% of Cablevision. While the company's shares trade below $35, Gabelli says they are worth $50.
The fight between the powerful fund manager and the Dolan family, which founded Cablevision and plans to take it private, is going to get messy and will probably end up in court. Gabelli probably has one of two goals in pushing the Dolans on the deal's price. The first would be to get them to increase their buyout offer. The other would be to bring a third party like Comcast Corp. (NASDAQ: CMCSA) to the table to make a higher bid of its own.
The Dolans have tried to take the company private twice before. Each time the deal has floundered on price.
The founding family may have a card up its sleeve. The value of cable companies has fallen sharply in recent months on increased competition from satellite TV and broadband and video offerings from the big telecom companies. Shares in Comcast have fallen from $30 earlier this year to $24.
For the Dolans, an interesting defense of their bid goes like this: the value of cable companies is falling, so actually we are overpaying to take our company private.
Best Buy (NYSE: BBY) September volatility elevated as expected into 9/18 EPS.
BBY is expected to report EPS on 9/18.
RBC Capital Mkts says, "our price target of $61 is based on approximately 17 times our FY09 EPS estimate of $3.60."
BBY September option implied volatility is at 41. BBY over all option implied volatility of 32 is near its 26-week average of 30 according to Track Data, suggesting flat outer month risk.
CVC, a leading entertainment & communications company controlled by the Dolan family, closed at $34.62.
The Dolan family's proposal of taking CVC private at $36.26 a share will be voted on at special meeting of CVC shareholders on 10/24/07. CVC has secured its board and its special committee approval.
CVC December call option implied volatility is at 22; puts are at 27, near its 26-week average of 23 according to Track Data, suggesting non-directional price risks.
Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
Comcast Corporation (NASDAQ: CMCSA), the massive cable, telephone and Internet service provider, was mentioned as one heck of a bargain in Barron's Magazine (subscription required), with one article participant labeling it as one of the cheapest 15 stocks in the S&P 500. The combination of strong revenue growth of 18% and strong cash generation could finance a $20 billion buyback, driving the $40 per share, one analyst believed.
However, despite being the number one player in this space, Brian Roberts, Comcast CEO, could be frustrated seeing his other cable brethren potentially making billions, particularly Cox Communications, who went private a few years ago, and Cablevision, who is in the process of going private. While Roberts & Family owns 100% of the voting stock, it only owns around 3 to 4% of the economic shares. The cumulative value of these shares approaches $1b, meaning Roberts could walk away with tens of billions in a successful private equity deal. While shut down for now, the private equity market will not be shutdown forever.
The numbers at Comcast are impressive, now serving 24 million homes versus number two Time Warner who serves 13 million. Comcast also has a presence in 20 of the 25 largest cities in the US.
Will Roberts ever take the private-equity leap, adding more debt on to the $33 billion already on its balance sheet? Most likely not. What has made Comcast the number one player in this space is the Roberts family's wise use of debt. Expect huge share buybacks to be the means for the industry pioneers to increase their ownership in the cable giant. The Roberts family is too risk averse to leverage this gem of a company to the hilt.
Back in December, I wrote about the difficulty that the NFL Network was having in getting off the ground. Last season, the network made 8 games available exclusively on the network hoping that it would spur fans to call their cable operators and demand the network. But it didn't happen.
According (subscription required) to The Wall Street Journal, Time Warner Cable (NYSE: TWC) and Cablevision are refusing to carry the network. Comcast (NYSE: CMCSA) has pulled the NFL Network from millions of homes and the NFL sued, lost, and is appealing. The league has even set up a nice astroturfish website to make its case to the public.
The NFL has had a difficulty relationship with networks, who feel that they are being gouged. Many industry observers view the NFL Network as an effort to say to ABC, ESPN, FOX, etc. "We don't need you. We can do this ourselves if we want." This may be more about leverage in contract negotiations than actually establishing the NFL Network as a viable station.
Of course, that will plan will backfire wonderfully if they can't get cable operators to carry it.
Cablevision (NYSE: CVC), an entertainment & communications company controlled by the Dolan family, closed at $21.65 Tuesday. 
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Back in December, I 
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