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 to The 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.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Mario Gabelli, founder and head of Gamco Investors, put a $51 per share valuation on Cablevision Systems Corporation (NYSE: CVC) shares. Cablevision shares closed at $35.45 at Friday's close.

Gabelli is one of the larger and longer-term owners of Cablevision stock and indicated in the current issue of Barron's (subscription required) he considered putting a bid in at $36 per share for the tri-state cable operator. Cablevision assets are located where Time Warner Cable would love to come in and pick them up. But the controlling shareholders, the Dolan family, will not allow anyone else to buy the company.

The current offer is at 10x 2007 EBITDA and only 8.8x the 2008 estimate. However, at the current offer, the Dolan family would lump $20 billion of debt on to its balance sheet to take the company private.

Cablevision's stock has had a good run resulting from the Dolan's buyout offers, but a $51 offer would be a nice profit. If you want to play a meaningfully higher offer for Cablevision, hedge your bets and buy some puts against your long. Remember, the Dolan's have a history of upsetting folks. Their ownership and management of the the Knicks has been anything but uplifting.

It seems that the Dolan family can't give up on its pursuit to buy Cablevision Systems Corp. (NYSE: CVC). I think there have been four bids or so and the Dolans made yet another offer – this time for $36.26 per share. The current stock price, as of Firday's close, is $35.45.

According to a recent piece in Barron's, it looks like the Dolans will fail yet again, which may actually be good news for shareholders.

Cablevision has a nice franchise, with three million cable subscribers. More importantly, the company is a cash cow. Thomson estimates show $2.3 billion in EBITDA in 2008.

There may be more value unlocked if the company is broken into various pieces. Cablevision also owns the Madison Square Garden, the New York Nicks and Rangers, as well as some cable networks. In fact, Barron's thinks the value of Cablevision could range from $50 to $60 per share.

Hey, the fact the Dolans keep making bids for the company, is probably the ultimate indication there's lots of value there.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

MAJOR PAPERS:

• Barron's Online's "Weekday Trader" column wrote that the takeover talk in telecom stocks Alltel Corporation (NYSE: AT), Qwest Communications International Inc (NYSE: Q), and Sprint Nextel Corporation (NYSE: S) may be overblown, as the logical acquirers for the companies appear uninterested, according to people familiar with the sector.
• The Wall Street Journal reported that Dolan family, founders of Cablevision Systems Corporation (NYSE: CVC), are on the verge of taking the company private in a deal estimated to be worth about $10.5B.
• The Wall Street Journal's "Heard on the Street" column discussed Rupert Murdoch's $5B play for Dow Jones and Company (NYSE: DJ), saying the Bancroft family may eventually find it difficult not to take Murdoch's offer.

OTHER PAPERS:

• The U.K. Times has learned that the U.S. Department of Justice is in talks to launch a formal inquiry into "alleged bribery and corruption" at BAE Systems (OTC: BAESY).
• According to a New York Post exclusive, Gap Inc (NYSE: GPS) is considering sizeable layoffs, to reduce expenses at the struggling retailer.

Cablevision shares are up $1.25, or more than 4%, to $30.50 as of 1 p.m. today after Wachovia raised its rating to a Buy and after the board rejected the Dolans' offer yesterday. TheDeal.com has a story this morning titled "Dolans' Loss, Time Warner's Gain?" (subscription required).

The article speculates that if the Dolan family chooses to undervalue its Cablevision Systems (NYSE: CVC), then perhaps Time Warner Inc. (NYSE: TWX) would be interested. In a previous article on Bloggingstocks this was addressed (referring to BusinessWeek coverage), although there would still be issues in doing this deal in the immediate term. There have been rumors in the past about this as well.

Cablevision is listed as the country's fifth largest cable company, and it is largely under the Dolans' control. The board of directors, according to the article, may want to protect their reputations; but this is probably a stretch because of the Dolan family stake.

For Time Warner to step in right now at this point, there would have to be implied competing bids and the justification would have to be that the company didn't want to let it get away.

We are also still waiting for the Time Warner Cable stock to leave the pink sheets under the "TCWAV" ticker to list on NYSE under the "TWC" ticker. Until that happens and the dust settles from the various funds trying to make their implied arbitrage and hedge trades, this is pure pondering. Back in November, 24/7 Wall St. made the case that Cablevision was potentially one of the most overvalued stocks out there, although there has been quite a lot of time and bid indication since then.

Interestingly enough, there is also on TheDeal.com a section titled "Do Not Let Chuck and Jim Dolan Steal CVC" from Rich Greenfield of Pali Research.

BusinessWeek ran an article in last Friday's edition discussing the Dolan family's low-ball bid for Cablevision Systems Corp. (NYSE:CVC) and how it could potentially open the door for Time Warner Inc. (NYSE:TWX) to step in and make a higher bid to acquire the company.

Normally this "after the report" article wouldn't even be noted, but this is still getting some discussion today and over the weekend and probably needs to be put to rest. This article is seemingly out of place in time right now, although down the road this could be interesting if Cablevision ever runs into trouble.

Companies like Cablevision are often thought of as poor private equity candidates because of the capital intensive operations that are required for cable and media build-outs. The new $30 offer made last week by the Dolans is still being dubbed as too low, and Banc of America just lowered the rating to Neutral in a research call this morning. CVC shares are currently at $28.36, so it is unclear how high a bid would have to be to win approval from Wall Street. Time Warner is also unlikely to put itself in a position where Wall Street thinks the company is going to overpay just to buy assets.

Cablevision has a current market cap of $8.3 billion and (as of the 9/30 quarter) it carried $12.2 billion in long-term debt in its $15.2 billion total debt. With Time Warner right at the launch of Time Warner Cable shares on NYSE (currently TWCAV on Pink Sheets), this might not be the best time for BusinessWeek to put issues like this on the table. Time Warner Cable and Comcast Corp. (NASDAQ:CMCSA) have just barely gotten past the closure of the Adelphia assets. The TWC shares, when they begin trading, will give Time Warner Cable some non-cash currency it can issue to do deals if it chooses, but a stock deal would actually give the Dolan's more control inside Time Warner Cable and its Time Warner parent. That is one point that would need to strongly be considered.

If The Wall Street Journal posted a breaking news story yesterday ahead of the official announcement, as Sarah Gilbert pointed out late last night, then it must have been true. And so it is. Bristol-Myers Squibb's board of directors has fired its chief executive officer Peter Dolan, effective immediately.

Not only has Dolan failed in his attempt to hold off cut-rate generics for Plavix, Bristol-Myers' top seller drug (among his other missteps over the years), but according to new information, a federal monitor also urged the company to fire the CEO and the General Counsel, Richard Willard (also to be dismissed).

With Apotex launching its generic Plavix earlier than expected, shareholders have intensified their pressure for a management change as Plavix contributes about 30% to Bristol's profits. But the calls to oust Dolan could be heard even before as analysts and investors found his performance lacking -- especially with the accounting scandal to inflate revenue that happened under his watch and the overpaying on drug deals. All left investors unhappy.

James Cornelius, formerly head of medical device maker Guidant Corp., was named by the board as the interim CEO. Cornelius is also a former chief financial officer for Eli Lilly.

Once the rumors of the possible management change started, Bristol-Myers shares have gained more than 1.5% after losing ground for quite some time during Dolan's years as CEO. Yesterday, Prudential even upgraded Bristol-Myers shares from underweight to overweight ahead of today's announcement. Analysts clearly believe the management change could win back investors' confidence.

Bristol-Myers Squibb (NYSE:BMY)'s CEO, Peter R. Dolan and General Counsel, Richard K. Willard, will be fired if the company's board of directors agrees with recommendations from an independent monitor. The Wall Street Journal made the unusual move of posting a "breaking news" notice on its web site in advance of the full story.

While Dolan's self-importance is such that the company's "about us" web page features his name, under "CEO:" as the first (and only managerial) Very Important Detail, he's made such gigantic missteps that a recent article said he had "precious little credibility." His attempts to delay generic competition for Plavix are being investigated by the Justice Department, and he's been responsible for "major financial scandals."

Today's Forbes asks, "Who Could Replace Peter Dolan?" and offers up names such as CFO Andrew Bonfield, Chief Scientific Officer Elliot Sigal (a "dark horse") and Karen Katen, Vice Chairman of Pfizer. We'll provide more details as we see them.