With Altice SA and Patrick Drahi circling Cablevision, FBN Securities' Robert Routh says the Bethpage, N.Y.-based MSO is actually undervalued as an acquisition target.
Altice is already paying $9.1 billion for a controlling interest in Suddenlink Communications--or about 10 times its cash flow. Routh argues in an investor note that Cablevision (NYSE: CVC) is currently undervalued at seven times cash flow.
Keep in mind that Cablevision stock is up about 8 percent since Drahi, chief of European telecom acquisition shark Altice, specifically mentioned the MSO as an acquisition target in a Friday Wall Street Journal story. Cablevision is also up markedly over the $18 level it was trading before the current wave of cable M&A began in late April. Cablevision's stock is at its highest point in four years.
Routh noted that since Suddenlink is a smaller MSO in much less valuable markets than the suburban New York areas serviced by Cablevision, it should be valued less in a merger.
Routh's analysis runs counter-intuitive to the position staked earlier in the month by analyst Craig Moffett. He argued that Cablevision's competitive overlap with Verizon FiOS (NYSE: VZ) renders it a terrible acquisition target.
"Never mind that every recent cable acquisition has trumpeted the low FiOS overlap of acquired systems as a defining attribute," Moffett wrote.
Drahi had sought to purchase Time Warner Cable (NYSE: TWC), following the collapse of its merger deal with Comcast. With TWC falling into the hands of Charter Communications, Drahi is now targeting other U.S. cable systems. He's already in the process of buying Suddenlink, and he's now targeting Cablevision and Cox Communications.
"We'll buy a second, a third and one day we'll be able to say: 'Hello Mr. Comcast!' or 'Hello, Mr. Charter!'" Drahi told the WSJ.
Cablevision significantly overvalued, Verizon FiOS overlap renders it 'not acquirable,' analyst says
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