Cablevision may spin off Rainbow Media Holdings


Having spun off Madison Square Garden as a separate company early this year, Cablevision is now looking at whether to do the same with Rainbow Media Holdings. The cable MSO says its board of directors has given management the go-ahead to explore a tax-free distribution of the programming unit to Cablevision shareholders.

Step one, already underway, is to file with the Internal Revenue Service for a private letter ruling that the spin-off would, indeed, be tax-free to shareholders. The spin-off would be leveraged, although there was no mention of how much debt Rainbow would take on.

If the transaction moves forward, Rainbow as a separate, public company would include:

-National programming networks: AMC, WE tv, IFC, Sundance Channel and Wedding Central

-IFC Entertainment, an independent film business that consists of multiple brands – including IFC Films, IFC Productions and the IFC Center – devoted to bringing the best of specialty films to a large audience

-Rainbow Network Communications (RNC), a full service network programming origination and distribution company, supplying an array of services to the cable, satellite and broadcast industries

Cablevision would retain its cable and telecommunications business, Newsday, News 12 Networks, MSG Varsity and Clearview Cinemas.

The announcement from Cablevision said the company would target mid-year 2011 for completion of the proposed spin-off, which is subject to a number of factors, including receipt of a private letter ruling from the IRS and approval by the board of directors. “Cablevision notes that there can be no assurance that a transaction will be consummated,” the announcement cautioned.

If you’re thinking of making a rival bid for the assets, don’t bother. Cablevision said it is not considering the sale of Rainbow or of it its cable and telecommunications business.

RBR-TVBR observation: Wall Street always prefers clean, pure-play public companies – unless, of course, the company is run by Warren Buffett. Despite no longer being a part of Cablevision, Madison Square Garden still has James Dolan as Executive Chairman, so it’s not like the Dolans no longer have a role in running MSG.