Cablevision up 8% plus as company considers actions; no 'smoking gun' found in Yahoo! recount

By Paul A. Harris

St. Louis, Aug. 5 - Cablevision Systems Corp. (NYSE: CVC) saw its shares rise 8.18%, or $2.12 on Tuesday - up more than 24% since the July 30 close - to end at $28.05.

Collins Stewart equities analyst Thomas Eagan, who covers the media sector, is inclined to attribute the share price improvement to the Bethpage, N.Y., company's second quarter earnings, which boasted net revenue growth of 9% and the addition of 7,000 subscribers.

Eagan also said that the Cablevision share price may also be benefiting from the company's announcement that it will explore ways of increasing shareholder value.

In a Tuesday news release Cablevision stated that it wants to bring the market value of the company's stock more closely in line with its underlying operating performance.

The options that the Cablevision board authorized management to explore include regular quarterly dividends or stock buybacks, as well as the spin-off of one or more businesses.

Satellite merger discussions

Moving from cable to satellite, on Tuesday a special situations equities analyst mentioned a Wall Street Journal story in which Dish Network Corp. chief executive officer Charles Ergen was reported by sources to be looking to revitalize merger discussions with DirecTV Group to better survive the increased industry competition.

Ergen estimates that the merger would yield annual synergies of up to $2 billion.

An antitrust attorney told the Journal that any significant deal announcement is unlikely to come before the November presidential elections.

Collins Stewart's Eagan told Prospect News Tuesday that he thinks the deal is unlikely to be approved by antitrust regulators.

Comparing it to the recently completed merger of Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc., now Sirius XM Radio Inc., Eagan said that while there is a lot of competition in satellite radio there is a lot less in satellite television, especially in the rural markets.

On Tuesday shares of Dish Network (Nasdaq: DISH) gained 7.42% per share, or $2.07, to close at $29.98.

Shares of DirecTV (Nasdaq: DTV) gained 3.35%, or $0.89, closing at $27.45.

Elsewhere, shares of Echostar Corp. (Nasdaq: SATS), the set-top box and fixed satellite services company which was spun off from DISH Network in January of this year, gained 1.08%, or $0.35 per share, to close at $32.83.

Meanwhile in the cable sector, apart from Cablevision, Comcast Corp. (Nasdaq: CMCSA) saw its shares trade 4.77% higher on Tuesday to close at $21.53, up $0.98 per share.

Mediacom Communications Corp. (Nasdaq: MCCC) shares gained 6.47%, or $0.35 per share, ending at $5.76.

Time Warner Cable Inc. (NYSE: TWC) shares moved up 4.91%, or $1.40, and closed at $29.90

However shares of troubles St. Louis-based cable TV operator Charter Communications, Inc. (Nasdaq: CHTR) dropped 4.39%, or a nickel per share, and closed at $1.09.

Yahoo! vote revisited

Shares of Yahoo! Inc. (Nasdaq: YHOO) gained 2.27% on Tuesday, up $0.44 to $19.82 per share, trailing Monday's news that Capital Research requested independent vote counter Broadridge Financial Solutions to examine the results of last Friday's shareholder vote.

In a Monday letter Broadridge stated that it was notified "by an investor of a potential discrepancy in a reported vote at the Yahoo annual meeting on Aug. 1.

"Upon review, it was determined that there was a truncation error in the final printout sent to the tabulator. This resulted in the under-reporting of shares withheld for certain directors.

"This error did not change the outcome of the election of directors, and was determined to be an isolated incident.

"Broadridge has determined that the situation was unique - a truncation error occurred when shares withheld for a specific director in a specific nominee exceeded 8 digits and were reported to the tabulator in paper format. Broadridge has fixed the problem. Further, Broadridge has verified that over the past 18 months there were no other meetings with reports that included this unique combination of factors. The review is ongoing for meetings occurring before then."

Subsequent to Friday's vote Yahoo! reported that its CEO, Jerry Yang, had received approvals from 85% of shareholders.

Capital Research, which is the second largest stakeholder in Yahoo!, at 16%, withheld its votes for Yang and for Yahoo! Chairman, Roy Bostock, as a protest against how the company handled the merger bid from Microsoft Corp. A stock analyst who covers Yahoo! described that vote-witholding strategy as "largely symbolic."

A curious move

The Yahoo! vote recount found Sachin Shah, special situations analyst for ICAP Securities, scratching his head.

In a Tuesday email Shah wrote that Jerry Yang and Roy Bostock "are obviously the lightning rod for Yahoo! shareholders, especially Capital Research.

"But, we think their anger, and for that matter their frustration, should lie with [Microsoft CEO] Steve Ballmer and Microsoft.

"There is pretty of blame to go around on both sides. Aside from Microsoft coming back, Yahoo! is working to unlock value or monetize its assets.

"On an objective level, what else does Capital Research want from Yahoo! and Yang?

"A new CEO could get Yahoo shareholders and the market excited, but there are not many candidates around."

Shah pointed out that AOL chief executive Jonathan Miller, whose name came up as a possible successor to Yang, cannot join Yahoo's board because of a non-compete agreement with Time Warner Inc. which is in effect until March 2009.

Meanwhile on Tuesday shares of Microsoft (Nasdaq: MSFT) gained 3.68%, or $0.93, to close at $26.21.

Shares of Time Warner Inc. (NYSE: TWX) gained 3.33%, or $0.48 or $0.48 per share, and close at $14.88.

And Google Inc. (Nasdaq: GOOG) saw its shares rise by 3.64%, or $16.85, to end the day at $479.85.

Tower to acquire CastlePoint

Tower Group, Inc. and CastlePoint Holdings, Ltd. announced on Tuesday that they have entered into a definitive agreement in which Tower will acquire CastlePoint in a cash and stock deal which comes to $12.68 per CastlePoint share.

The transaction is valued at approximately $490 million.

Tower currently owns approximately 6.7% of CastlePoint's common shares and intends to vote all of them in favor of the transaction.

Under the terms of the agreement, CastlePoint shareholders (other than Tower) will receive 0.47 shares of Tower common stock and $1.83 in cash for each share of CastlePoint stock.

The exchange ratio is subject to adjustment based on Tower's volume weighted average price per share during a 15 day trading window prior to closing, and will be fixed at 0.47 if the average price is equal to or greater than $20 and equal to or less than $26.

If the average stock price falls below $17.50, the exchange ratio will be fixed at 0.5371, and CastlePoint will have the right, for a limited period, to terminate the agreement, unless Tower elects to add its shares or cash to provide CastlePoint shareholders with a value per share of $11.23 (including the amount in cash per share).

The acquisition is not expected to require any external financing.

The transaction is expected to close in December, subject to customary conditions, including the approval by Tower and CastlePoint shareholders, as well as regulatory approvals.

Late Tuesday a special situations equities analyst told Prospect News that CastlePoint CEO Michael Lee said on conference call that he has spoken to regulators Bermuda Monetary Authority and New York Insurance Dept. and sees no problem securing the necessary approvals.

In Tuesday trading CastlePoint (Nasdaq: CPHL) shares gained 27.93%, or $2.48 per share, to close at $11.36.

Meanwhile shares of Tower Group lost 4.59%, or $1.06, and closed at $22.03.

Tuesday's situations unfolded against a backdrop of massive rallying in all three major U.S. stock indexes.

The Dow Jones Industrial Average ended the day 2.94% higher, gaining 331.62 points to end at 11,615.77.

The S&P 500 climbed 2.87%, or 35.87 points, and closed at 1,284.88.

Meanwhile the Nasdaq gained 2.81% to finish at 2,349.83, up 64.27 points on the day.

According to capital markets sources the stock rally came as the Federal Reserve Bank's policy-making Federal Open Market Committee chose to leave the key Fed Funds interest rate unchanged at 2.0%, while the price of a barrel of crude oil fell by nearly $2.25 on Tuesday, touching an intraday low of $118 per barrel.

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