Biggy
03-04-2005, 01:48 PM
http://online.wsj.com/article/0,,SB1109859...page%5Fone%5Fus (http://online.wsj.com/article/0,,SB110985977098969483,00.html?mod=home%5Fpage%5F one%5Fus)
From the Wall Street Journal:
Chairman's Board Purge
Alters Cablevision Picture
Dolan's Moves Win Reprieve
For Struggling Satellite Unit
Opposed by His CEO Son
By PETER GRANT
Staff Reporter of THE WALL STREET JOURNAL
March 4, 2005; Page A1
The nasty family fight at Cablevision Systems Corp. escalated as Chairman Charles Dolan won a last-minute reprieve for the company's struggling satellite business after ousting three directors who had voted to shut it down.
The dramatic developments at America's sixth-largest cable company raised the hackles of corporate-governance advocates, opened the company to possible shareholder lawsuits and, in the eyes of some investment analysts, could increase the odds of the company being sold. Shares of Cablevision dropped 5.3%, or $1.59, to close at $28.65 as of 4 p.m. in New York Stock Exchange composite trading.
Mr. Dolan's highly unusual move to bring the board to heel also marked the latest chapter in the increasingly bitter family feud between the 78-year-old chairman and his son James, Cablevision's CEO, who has opposed his father's support for the company's tiny satellite business, known as Voom. "This is one of the most bizarre things I've ever seen," said Craig Moffett, a cable analyst with Sanford C. Bernstein & Co.
The recent chain of events began Monday, when Cablevision issued a statement saying it would cease operating Voom, which Charles Dolan has pushed for more than a decade. The company had voted to halt funding for Voom in January, and given Charles Dolan until this week to negotiate a purchase of its remaining assets. But no deal was reached.
Charles Dolan, who controls a majority of a special class of stock with super voting rights, responded late Wednesday, when he announced he had replaced three directors who had voted against funding Voom, and filled a vacancy created by the recent death of director John Tatta, with four well-known executives to whom he long has had personal ties. The ousted directors were William Bell and Sheila Mahony, recently retired officers of Cablevision, and investment banker Steven Rattner. Among those joining the board are cable magnate John Malone.
Charles Dolan also said he plans to add Brian Sweeney, his son-in-law and a senior vice president at Cablevision, to a newly created board seat, boosting the total number of directors to 15 -- a third of whom will be new.
Yesterday, Cablevision told the Securities and Exchange Commission it was suspending efforts to shut down Voom to give Mr. Dolan more time to put together a deal to buy it. He is scheduled to sit down with the reconstituted board on Monday and is expected to report about his efforts to line up financing to buy Voom's remaining assets.
Charles Dolan also has sent Voom employees an optimistic memo, noting that financing for his deal with Cablevision "is in place." After Cablevision shut down Voom's Web site this week, a company he set up in hopes of acquiring Voom launched a Web site of its own. In just over one year of operations, Voom has attracted fewer than 50,000 subscribers while suffering big losses, currently estimated at between $30 million and $40 million a month.
[New Guard]
Then, late yesterday, a committee of independent directors sent Charles Dolan a letter, which was filed with the SEC, expressing concern that Voom is continuing to take on subscribers, at least in part through Mr. Dolan's Web site. "These efforts -- likely to deceive new subscribers and the public into believing that Voom is still an authorized going business of Cablevision -- are in direct contradiction to the action taken by the board..." the letter stated.
The letter, written by board member Victor Oristano, also disclosed that Charles Dolan is negotiating with EchoStar Communications Corp., which acquired Voom's only operational satellite after the board decided to stop funding the service in January.
The board purge surprised both investors and experts in corporate governance, who said Charles Dolan's unilateral actions, taken without approval of Cablevision's full board, were practically unprecedented.
"Replacing a group of directors midstream like that in a large public company almost never happens," said Charles Elson, head of the Weinberg Center for Corporate Governance at the University of Delaware business school.
A spokesman for Cablevision declined to comment yesterday, as did Charles and James Dolan through spokesmen. The ousted board members couldn't be reached for comment.
Charles Dolan has been determined to keep Voom going despite widespread criticism by investors and analysts of its strategy and losses, which reached $661.4 million last year. One of the pioneers of the cable industry, Mr. Dolan has long been convinced that satellite is the delivery system of the future for television. Some analysts and investors believe he may put Cablevision on the block to raise money to keep Voom going.
But by the time Voom was launched in late 2003, the two leading satellite operators, EchoStar and DirecTV Inc. had more than 20 million subscribers between them. Mr. Dolan tried to distinguish Voom by offering more high-definition channels than competitors, but the difference failed to attract enough subscribers to make Voom a viable business.
Charles Dolan had the power to replace directors because he controls a majority of a special class of super voting stock. Last year, Cablevision's board voted to become a family "controlled company" in the eyes of the New York Stock Exchange, meaning it doesn't have to abide by all the exchange's standards for independence on corporate boards.
Edward Horowitz, a spokesman for Charles Dolan, said the new board members would act independently. "None of these guys are pushovers," he said. "If anything, their addition to the board will add independence."
For his part, James Dolan has been CEO since 1995, but has struggled to emerge from the shadow of his father. Cablevision recently has reported impressive financial results, but only three years ago it faced a liquidity crisis that forced it to lay off staff and sell assets. The 49-year-old CEO also played a key role in buying the electronics retailer The Wiz out of bankruptcy, a mistake that cost the company more than $250 million in losses before it was liquidated in 2003. He also has been criticized for how he runs the New York Knicks professional basketball team, which the family owns, which has been a middling performer since 1999.
Charles and James Dolan have had numerous differences over the years, but never before have their spats become public. Complicating their relationship, their homes sit next to each other on the same property overlooking Oyster Bay on Long Island, N.Y. James Dolan is the youngest of three sons, all of whom work at Cablevision and sit on the board.
Cablevision is closely watched in the cable industry because its cable systems are all in the New York City region, making it an attractive takeover candidate for larger companies like Time Warner Inc., Comcast Corp. and Cox Communications Inc. The Dolan family is a fixture on the New York City scene because Cablevision owns Madison Square Garden, Radio City Music Hall and the New York Knicks and family members have mixed it up with such New York heavyweights as George Steinbrenner. Most recently, Cablevision has been battling New York City Mayor Michael Bloomberg over a proposed stadium that might compete with Madison Square Garden.
Some shareholders praised Charles Dolan's action, noting the track record and reputation of the new board members. Besides Mr. Malone, they include Frank Biondi Jr., former chief executive of Viacom Inc.; Rand Araskog, former chief executive of ITT Corp.; and Leonard Tow, former chief executive of Century Communications Corp., a cable company acquired by Adelphia Communications Inc.
All the new directors are veteran executives in the cable and entertainment businesses. Mr. Dolan got to know Mr. Biondi when Cablevision was a big customer of Home Box Office and, later, Viacom. Mr. Dolan and Mr. Tow were original members of a group of midsize cable operators known as the "Entrepreneurs Group" formed in the 1980s. He and Mr. Araskog got to know each other through ITT's partnership with Cablevision in Madison Square Garden in the mid-1990s.
"This is a great, all-star team," says Mario Gabelli, chief executive of Gabelli Asset Management, whose funds hold about a 10.3% stake in Cablevision.
Corporate-governance experts said the new board can legally reverse decisions made by the prior board as long as directors believe they are acting in the best interest of all shareholders and aren't simply rubber-stamping decisions by Charles Dolan. But the board's decisions regarding Voom will be closely scrutinized and directors could face shareholder lawsuits if they approve continued funding of Voom by Cablevision.
Cablevision already has been under increasing criticism because it has two types of stock that gives the Dolans more rights than other shareholders. While the family owns about 26% of the equity in Cablevision, valued at about $1.5 billion, it elects 75% of the directors through its Class B shares. Charles Dolan, who controls a majority of those shares through a series of trusts, said in his statement Wednesday night that the Class B shareholders will exercise their rights to elect 75% of the directors at the company's annual meeting scheduled for May 19.
From the Wall Street Journal:
Chairman's Board Purge
Alters Cablevision Picture
Dolan's Moves Win Reprieve
For Struggling Satellite Unit
Opposed by His CEO Son
By PETER GRANT
Staff Reporter of THE WALL STREET JOURNAL
March 4, 2005; Page A1
The nasty family fight at Cablevision Systems Corp. escalated as Chairman Charles Dolan won a last-minute reprieve for the company's struggling satellite business after ousting three directors who had voted to shut it down.
The dramatic developments at America's sixth-largest cable company raised the hackles of corporate-governance advocates, opened the company to possible shareholder lawsuits and, in the eyes of some investment analysts, could increase the odds of the company being sold. Shares of Cablevision dropped 5.3%, or $1.59, to close at $28.65 as of 4 p.m. in New York Stock Exchange composite trading.
Mr. Dolan's highly unusual move to bring the board to heel also marked the latest chapter in the increasingly bitter family feud between the 78-year-old chairman and his son James, Cablevision's CEO, who has opposed his father's support for the company's tiny satellite business, known as Voom. "This is one of the most bizarre things I've ever seen," said Craig Moffett, a cable analyst with Sanford C. Bernstein & Co.
The recent chain of events began Monday, when Cablevision issued a statement saying it would cease operating Voom, which Charles Dolan has pushed for more than a decade. The company had voted to halt funding for Voom in January, and given Charles Dolan until this week to negotiate a purchase of its remaining assets. But no deal was reached.
Charles Dolan, who controls a majority of a special class of stock with super voting rights, responded late Wednesday, when he announced he had replaced three directors who had voted against funding Voom, and filled a vacancy created by the recent death of director John Tatta, with four well-known executives to whom he long has had personal ties. The ousted directors were William Bell and Sheila Mahony, recently retired officers of Cablevision, and investment banker Steven Rattner. Among those joining the board are cable magnate John Malone.
Charles Dolan also said he plans to add Brian Sweeney, his son-in-law and a senior vice president at Cablevision, to a newly created board seat, boosting the total number of directors to 15 -- a third of whom will be new.
Yesterday, Cablevision told the Securities and Exchange Commission it was suspending efforts to shut down Voom to give Mr. Dolan more time to put together a deal to buy it. He is scheduled to sit down with the reconstituted board on Monday and is expected to report about his efforts to line up financing to buy Voom's remaining assets.
Charles Dolan also has sent Voom employees an optimistic memo, noting that financing for his deal with Cablevision "is in place." After Cablevision shut down Voom's Web site this week, a company he set up in hopes of acquiring Voom launched a Web site of its own. In just over one year of operations, Voom has attracted fewer than 50,000 subscribers while suffering big losses, currently estimated at between $30 million and $40 million a month.
[New Guard]
Then, late yesterday, a committee of independent directors sent Charles Dolan a letter, which was filed with the SEC, expressing concern that Voom is continuing to take on subscribers, at least in part through Mr. Dolan's Web site. "These efforts -- likely to deceive new subscribers and the public into believing that Voom is still an authorized going business of Cablevision -- are in direct contradiction to the action taken by the board..." the letter stated.
The letter, written by board member Victor Oristano, also disclosed that Charles Dolan is negotiating with EchoStar Communications Corp., which acquired Voom's only operational satellite after the board decided to stop funding the service in January.
The board purge surprised both investors and experts in corporate governance, who said Charles Dolan's unilateral actions, taken without approval of Cablevision's full board, were practically unprecedented.
"Replacing a group of directors midstream like that in a large public company almost never happens," said Charles Elson, head of the Weinberg Center for Corporate Governance at the University of Delaware business school.
A spokesman for Cablevision declined to comment yesterday, as did Charles and James Dolan through spokesmen. The ousted board members couldn't be reached for comment.
Charles Dolan has been determined to keep Voom going despite widespread criticism by investors and analysts of its strategy and losses, which reached $661.4 million last year. One of the pioneers of the cable industry, Mr. Dolan has long been convinced that satellite is the delivery system of the future for television. Some analysts and investors believe he may put Cablevision on the block to raise money to keep Voom going.
But by the time Voom was launched in late 2003, the two leading satellite operators, EchoStar and DirecTV Inc. had more than 20 million subscribers between them. Mr. Dolan tried to distinguish Voom by offering more high-definition channels than competitors, but the difference failed to attract enough subscribers to make Voom a viable business.
Charles Dolan had the power to replace directors because he controls a majority of a special class of super voting stock. Last year, Cablevision's board voted to become a family "controlled company" in the eyes of the New York Stock Exchange, meaning it doesn't have to abide by all the exchange's standards for independence on corporate boards.
Edward Horowitz, a spokesman for Charles Dolan, said the new board members would act independently. "None of these guys are pushovers," he said. "If anything, their addition to the board will add independence."
For his part, James Dolan has been CEO since 1995, but has struggled to emerge from the shadow of his father. Cablevision recently has reported impressive financial results, but only three years ago it faced a liquidity crisis that forced it to lay off staff and sell assets. The 49-year-old CEO also played a key role in buying the electronics retailer The Wiz out of bankruptcy, a mistake that cost the company more than $250 million in losses before it was liquidated in 2003. He also has been criticized for how he runs the New York Knicks professional basketball team, which the family owns, which has been a middling performer since 1999.
Charles and James Dolan have had numerous differences over the years, but never before have their spats become public. Complicating their relationship, their homes sit next to each other on the same property overlooking Oyster Bay on Long Island, N.Y. James Dolan is the youngest of three sons, all of whom work at Cablevision and sit on the board.
Cablevision is closely watched in the cable industry because its cable systems are all in the New York City region, making it an attractive takeover candidate for larger companies like Time Warner Inc., Comcast Corp. and Cox Communications Inc. The Dolan family is a fixture on the New York City scene because Cablevision owns Madison Square Garden, Radio City Music Hall and the New York Knicks and family members have mixed it up with such New York heavyweights as George Steinbrenner. Most recently, Cablevision has been battling New York City Mayor Michael Bloomberg over a proposed stadium that might compete with Madison Square Garden.
Some shareholders praised Charles Dolan's action, noting the track record and reputation of the new board members. Besides Mr. Malone, they include Frank Biondi Jr., former chief executive of Viacom Inc.; Rand Araskog, former chief executive of ITT Corp.; and Leonard Tow, former chief executive of Century Communications Corp., a cable company acquired by Adelphia Communications Inc.
All the new directors are veteran executives in the cable and entertainment businesses. Mr. Dolan got to know Mr. Biondi when Cablevision was a big customer of Home Box Office and, later, Viacom. Mr. Dolan and Mr. Tow were original members of a group of midsize cable operators known as the "Entrepreneurs Group" formed in the 1980s. He and Mr. Araskog got to know each other through ITT's partnership with Cablevision in Madison Square Garden in the mid-1990s.
"This is a great, all-star team," says Mario Gabelli, chief executive of Gabelli Asset Management, whose funds hold about a 10.3% stake in Cablevision.
Corporate-governance experts said the new board can legally reverse decisions made by the prior board as long as directors believe they are acting in the best interest of all shareholders and aren't simply rubber-stamping decisions by Charles Dolan. But the board's decisions regarding Voom will be closely scrutinized and directors could face shareholder lawsuits if they approve continued funding of Voom by Cablevision.
Cablevision already has been under increasing criticism because it has two types of stock that gives the Dolans more rights than other shareholders. While the family owns about 26% of the equity in Cablevision, valued at about $1.5 billion, it elects 75% of the directors through its Class B shares. Charles Dolan, who controls a majority of those shares through a series of trusts, said in his statement Wednesday night that the Class B shareholders will exercise their rights to elect 75% of the directors at the company's annual meeting scheduled for May 19.