Cablevision slides as big shareholder rejects Dolan bid; Kellwood down after shunning Sun proposal

By Sheri Kasprzak

New York, Oct. 17 - Cablevision Systems Corp.'s biggest outside shareholder will likely vote down a buyout plan from the Dolan Family Group - the founder of the company.

ClearBridge Advisors, an equity manager held by Legg Mason, Inc., said it will vote against the planned $36.26 per share offer made by the Dolans. Still, the Dolan family is not budging on the offer.

The move sent shares of Cablevision down Wednesday and also sent sell-side traders talking about the move.

"I don't think the deal has a chance of getting done," said one sell-side trader. "And I think they [ClearBridge Advisors] have a solid point. It does seem like a steal. They're basically trying to grab control for free."

Another sell-sider agreed.

"It's an attempt to buy them out without much consideration for the shareholders," he scoffed. "I don't necessarily think that takeover is completely out of the question but I don't see it happening at this price."

In other troubled acquisition proposals, Kellwood Co. has rejected an unsolicited proposal from Sun Capital Securities Group, LLC to buy the company out at $21 per share, claiming the offer undervalues its ability to generate income.

The decision to reject the proposal came as a shock to one analyst.

"It seems to me like they're biting the hand that's trying to feed them," he said. "Kellwood hasn't performed well and the offer seemed more than generous, if you ask me."

Kellwood suffered a $2.54 per share net loss in the last quarter and has been downgraded since by Broadpoint Capital Inc. and First Albany.

When the Sun Capital offer came in September, shares of Kellwood jumped by 26.37%, or $4.00.

Shares of Kellwood closed down 32 cents, or 1.81%, on Wednesday at $17.35 (NYSE: KWD).

In other merger news, Munich Re agreed to buy Midland Co. in a $1.3 billion transaction. The news sent shares of Midland up 11%. The stock gained $6.30 to close at $63.57 (Nasdaq: MLAN).

ClearBridge turns nose up at Dolan offer

ClearBridge, the biggest independent shareholder of New York-based Cablevision, said Wednesday it plans to vote against the Dolan family's $36.26 offer to buyout Cablevision.

The move sent shares of Cablevision down early. By 10:45 a.m. ET, shares of Cablevision were lower by 80 cents, or 2.37%. The stock closed down $1.15, or 3.5%, to end at $32.52 (NYSE: CVC).

"At the proposed offering price, ClearBridge Advisors does not feel that the shareholders are being adequately compensated for the expected growth in Cablevision's free cash flow - as reflected in its Schedule 14A dated Sept. 14, 2007 - nor the value of the other assets owned by the company," said a statement released Wednesday morning by ClearBridge.

ClearBridge owned 31 million shares of Cablevision valued at more than $1 billion, as of June 30.

Even though ClearBridge said it will shoot down the offer, the Dolan Family Group, the founder of Cablevision, isn't budging.

"On behalf of my parents, brothers and sisters, I want to state emphatically that there will be no modification of the family's accepted offer to acquire Cablevision," said James Dolan, Cablevision's chief executive officer, in a statement.

"We are looking forward to next week's vote and hope that the transaction is approved, but I'd underscore that I am completely prepared to continue to lead the company into the future as a public company if the transaction is not approved."

Shareholders are to vote on the planned buyout on Oct. 24.

Kellwood rejects Sun offer

In other proposal rejection news, Kellwood's board of directors said it will not entertain an unsolicited $21 per share acquisition proposal from Sun Capital Securities.

"This decision comes after careful consideration of the unsolicited proposal of Sun Capital to pursue an acquisition of the company at a price of $21 per share, and taking into account the potential benefits that may be realized through the company's previously announced long-term strategic plan," said a statement released Wednesday by Kellwood.

The review, the statement noted, included a consultation with Banc of America Securities LLC as independent financial advisor.

The board found in its review that the proposal "significantly undervalues the strength of Kellwood's expanded portfolio of brands and the company's opportunities for sales and earnings growth."

"Our board is committed to enhancing shareholder value and the Sun Capital proposal is not consistent with this objective," said Robert Skinner, CEO of Kellwood, in a news release.

"We continue to believe that executing our corporate strategy to reinvigorate our core business, expand our penetration into higher profile, better and above price point brands, connect more directly with consumers, and utilize our operating infrastructure more efficiently to fund our growth will deliver greater value to our shareholders. Our board is determined to enable all of its shareholders to participate in these future benefits resulting from the company's sales and earnings growth strategy."

Kellwood is a St. Louis-based marketer of apparel and consumer goods.

Munich Re to buy Midland

Elsewhere, Munich Re plans to buy out Midland Co. in a deal valued at $1.3 billion.

The plan sent shares of Midland up. The stock gained $6.30 to close at $63.57.

Munich Re plans to pay $65 per share in cash for Midland, a 13.5% premium over the specialty insurance company's $57.27 closing stock price on Tuesday.

The deal is set to close in the first half of 2008.

"We are very excited about this unique opportunity to take this premier specialty property and casualty insurance company and join forces with one of the largest reinsurance companies in the world," said Midland's CEO John Hayden in a statement.

"This will allow us to take our deep specialty property and casualty industry expertise and our product and distribution platform and expand in ways that may not have been possible without the capital, resources and reputation of an organization like Munich Re. We believe that our platform, combined with the financial strength and diverse risk expertise of Munich Re, will allow us to better serve our existing policyholders and distribution partners while expanding within select specialty markets."

Munich Re board member Peter Roeder said the move is strategic in nature.

"Midland represents an excellent strategic fit for our organization," Roeder said, in the statement.

"It is a great company in itself, and we intend to leverage Munich Re's strengths in order to further develop the business. With our new U.S. strategy, we aim to grow profitably in the world's most important insurance and reinsurance market. As such, establishing a leading position in niche segments of the U.S. primary insurance market is a significant aspect of our 'Changing Gears' strategy for the USA."

Spectrum postpones asset sale

In other news, Spectrum Brands, Inc. said it will put off selling some of its assets because of the recent troubles in the credit markets.

The move sent shares of Spectrum Brands plummeting.

By 12:30 p.m. ET, the stock was down 14.64%, or 71 cents. The stock ended the day down 16.29%, or 79 cents, at $4.06 (NYSE: SPC).

"We are still committed to reducing outstanding indebtedness and leverage through the sale of assets," said Spectrum CEO Kent Hussey, in a news release.

"We believe that postponing the auction process until such time as the credit markets improve will allow us to achieve a full and fair valuation of these assets."

Hussey announced in August that Spectrum was planning to sell off certain unnamed assets in an effort to improve the company's capital situation.

Hussey said then that cash was not an issue for the company.

With headquarters in Atlanta, Spectrum is a consumer products company and supplier of batteries and portable lighting, law and garden care products, specialty pet supplies, shaving and grooming products and household insecticides.

Earlier this month, Spectrum put a $225 million asset-based revolving credit facility in place. This facility, Spectrum said Wednesday, provides sufficient liquidity to operate its business on an ongoing basis.

Ramius nominates candidates for Luby's board

Ramius Capital Group, LLC and Starboard Value and Opportunity Master Fund Ltd. said Wednesday they have nominated four independent candidates to the board of directors of Luby's, Inc.

Ramius owns 7.1% of Luby's stock. Luby's shares ended up 15 cents, or 1.39%, to close at $10.95 (NYSE: LUB).

"Ramius believes that its nominees will strengthen the quality of Luby's board by adding valuable restaurant industry and corporate finance expertise," said a statement released Wednesday by Ramius.

"In addition, Ramius believes that its nominees can prove valuable in helping management evaluate and execute on its new growth strategy, explore various strategic and financing alternatives to enhance shareholder value and ensure that the company is being run solely for the benefit of all Luby's shareholders."

The move was made, said Jeffrey Smith, Ramius partner, because Ramius feels Luby's is undervalued.

"While we are excited about the potential growth prospects for the business, we believe the board can be strengthened to enable a higher probability of the most successful outcome. To this end, Ramius has nominated four independent, experienced restaurant and corporate finance industry professionals to assist Luby's in maximizing shareholder value. Our independent nominees are well qualified to help evaluate and then oversee all available opportunities while ensuring that Luby's maintains an appropriate capital structure and real estate portfolio. They are committed to acting solely in the best interests of all Luby's shareholders."

The proposed board nominees include Stephen Farrar, former senior vice president for the Western Region for Wendy's International, Inc.; William J. Fox, a business advisor and consultant; Brian Grube, former chief executive officer of Baja Fresh Mexican Grill; and Matthew Pannek, former CEO of Magic Brands, LLC and Fuddruckers, Inc.

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