The upside of the Cablevision transaction
In the previous part of the series, we learned that the Altice (ATCEY) acquisition of Cablevision (CVC) is expected to close soon. This is the second major US cable deal this year after the merger of Charter Communications (CHTR), Time Warner Cable (TWC), and Bright House Networks.
The New York Public Service Commission (or PSC) laid down some conditions for the Cablevision transaction, which were accepted by both companies on June 16, 2016.
According to the PSC, “Public interest conditions that the Commission estimates will provide $243 million in benefits to New York consumers to upgrade the broadband infrastructure, create a new low-income broadband program, build out its network in unserved areas, and provide some $40 million of additional benefits associated with Cablevision’s participation in a new federal broadband affordability program.”
The PSC added that as part of the conditions, “the company will also maintain a strong customer-service workforce by committing to no layoffs for four years.”
Moody’s ratings action after the regulatory approval
After the approval of the Cablevision transaction by the New York Public Service Commission, Moody’s Investors Service cut Cablevision’s Corporate Family Rating from Ba2 to B1. Moody’s noted, “Cablevision’s B1 CFR reflects its high leverage, parent company’s aggressive financial policy, and significant business risk inherent in Altice’s cost cutting strategy.”
Moody’s noted that Altice’s expected annual synergies of $450 million from the Cablevision transaction should begin 18 to 24 months after the completion of the transaction.
For diversified exposure to some of the top cable companies in the US, you may consider investing in the SPDR S&P 500 ETF (SPY). This ETF held a total of ~0.9% in Comcast (CMCSA) and Cablevision (CVC) at the end of May 2016.