Cablevision bull Rich Greenfield has changed his tune, and is now advising investors to sell CVC. What changed Rich’s mind? The Dolan’s deal to buy a stake in concert promoter AEG.
Rich says he doesn’t have a problem with AEG transaction in and of itself — $150 million for a 35% stake in the company, with Barry Diller’s Ticketmaster picking up another 14%. But he’s worried that the deal signals a major shift for the Dolan’s cable company, which he thinks is trying to turn itself into a live events company.
CVC has always been a takeover play: Investors have been waiting for the Dolans to sell its valuable network of NY-area subscribers to Time Warner (TWX) or another big MSO, but that’s never materialised. The Dolans attempted to buy out the company themselves last fall, but investors shot that deal down themselves. Now they look to be shifting gears entirely.
If we believed CVC’s actions were isolated to the AEG investment or even just one more theatre venue, we would have likely maintained our BUY rating. However, we believe several acquisitions are currently in the works (we believe CVC was meeting with its financial advisors in NYC last Friday concerning the AEG Live investment). In turn, we believe there will be several negative data points over the next year that increasingly frustrate current CVC shareholders with investors unlikely/unwilling to give CVC credit for the free cash flow its cable system/cable network assets are expected to generate over the next few years.
Bonus graphic: Check out Rich’s homemade chart detailing the web of live events deals the Dolans have already made.
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