The Distribution is the method by which Cablevision will separate the business of our Company from Cablevision's other businesses, creating two separate, publicly-traded companies. In the Distribution, Cablevision will distribute to its shareholders all of the shares of our Class A Common Stock and Class B Common Stock that it owns. Following the Distribution, we will be a separate company from Cablevision, and Cablevision will not retain any ownership interest in us. The number of shares of Cablevision common stock you own will not change as a result of the Distribution.
Approximately 62.0 million shares of our Class A Common Stock and 13.6 million shares of our Class B Common Stock will be distributed in the Distribution, based upon the number of shares of Cablevision NY Group Class A Common Stock and Cablevision NY Group Class B Common Stock outstanding on the record date. The shares of our Class A Common Stock and Class B Common Stock to be distributed by Cablevision will constitute all of the issued and outstanding shares of our Class A Common Stock and Class B Common Stock immediately after the Distribution. Please refer to our Information Statement filed with the SEC for further information.
Holders of Cablevision NY Group Class A Common Stock will receive a distribution of one share of our Class A Common Stock for every four shares of Cablevision NY Group Class A Common Stock held by them on the record date, and holders of Cablevision NY Group Class B Common Stock will receive a distribution of one share of our Class B Common Stock for every four shares of Cablevision NY Group Class B Common Stock held by them on the record date. As a result of the Distribution, your proportionate interest in Cablevision will not change and you will own the same percentage of equity securities and voting power in The Madison Square Garden Company as you previously did in Cablevision. Please refer to our Information Statement filed with the SEC for further information.
Record ownership will be determined as of the close of business, New York City time, on January 25, 2010, which we refer to as the record date. The person in whose name shares of Cablevision common stock are registered at the close of business on the record date is the person to whom shares of the Company's common stock will be issued in the Distribution. As described below, the Cablevision NY Group Class A Common Stock will not trade on an ex-dividend basis with respect to our common stock and, as a result, if a record holder of Cablevision NY Group Class A Common Stock sells those shares after the record date and on or prior to the Distribution date, the seller will be obligated to deliver to the purchaser the shares of our common stock that are issued in respect of the transferred Cablevision NY Group Class A Common Stock.
We expect that shares of our Class A Common Stock and Class B Common Stock will be distributed by the distribution agent, on behalf of Cablevision, at 11:59 p.m. on February 9, 2010, which we refer to as the Distribution date.
Following the Distribution, we will be a public company and Cablevision will have no continuing stock ownership interest in us. In connection with the Distribution, we and Cablevision have entered into a Distribution Agreement and have entered or will enter into several other agreements for the purpose of accomplishing the distribution of our common stock to Cablevision's common stockholders. These agreements also will govern our relationship with Cablevision subsequent to the Distribution and provide for the allocation of employee benefit, tax and some other liabilities and obligations attributable to periods prior to the Distribution. These agreements will also include arrangements with respect to transition services and a number of ongoing commercial relationships. The Distribution Agreement provides that we and Cablevision agree to provide each other with appropriate indemnities with respect to liabilities arising out of the businesses being transferred to us by Cablevision. We are also party to other arrangements with Cablevision and its subsidiaries, such as affiliation agreements covering the MSG Networks. Following the Distribution, both we and Cablevision will both be controlled by Charles F. Dolan, members of his family and certain related family entities.
Following the Distribution, our intercompany advances to a subsidiary of Cablevision (in an aggregate amount of $190 million) will remain outstanding. Prior to the Distribution date, the terms of these advances will be changed to provide for a maturity date of no later than June 30, 2010 (with prepayment at Cablevision's option) and for the payment of cash interest at a fixed rate equal to the prime rate on the date the changes to the terms are made.
There is an overlap between the senior management of the Company and Cablevision. James L. Dolan serves as the Executive Chairman of the Company and as the President and Chief Executive Officer and as a director of Cablevision. Hank J. Ratner serves as the President and Chief Executive Officer of the Company and as Vice Chairman of Cablevision. In addition, immediately following the Distribution, eight of the members of our Board of Directors will also be directors of Cablevision, and several of our directors will continue to serve as officers and/or employees of Cablevision concurrently with their service on our Board of Directors.
Please see our Information Statement filed with the SEC for a discussion of the policy that will be in place for dealing with potential conflicts of interest that may arise from our ongoing relationship with Cablevision.
No action is required on your part. Shareholders of Cablevision on the record date for the Distribution are not required to pay any cash or deliver any other consideration, including any shares of Cablevision common stock, for the shares of our common stock distributable to them in the Distribution.
No. No ex-dividend market will be established for our Class A Common Stock until the first trading day following the Distribution date. Therefore, if you own shares of Cablevision NY Group Class A Common Stock on the record date and thereafter sell those shares on or prior to the Distribution date, you will also be selling the shares of our Class A Common Stock that would have been distributed to you in the Distribution with respect to the shares of Cablevision NY Group Class A Common Stock you sell. Conversely, a person who purchases shares of Cablevision NY Group Class A Common Stock after the record date and on or prior to the Distribution date will be entitled to receive from the seller of those shares the shares of our Class A Common Stock issued in the Distribution with respect to the transferred Cablevision NY Group Class A Common Stock.
If you would be entitled to receive a fractional share of our Class A Common Stock in the Distribution, you will instead receive a cash payment. Please refer to our Information Statement filed with the SEC for further information.
Holders of shares of Cablevision's NY Group Class A Common Stock or NY Group Class B Common Stock on the record date will receive shares of the same class of our common stock, in book-entry form. Please refer to our Information Statement filed with the SEC for further information.
The potential benefits considered by Cablevision's board of directors in making the determination to consummate the Distribution included the following:
- to increase the aggregate value of the stock of Cablevision and the Company above the value that the stock of Cablevision would have had if it had continued to represent an interest in both the businesses of Cablevision and the Company, so that following the Distribution each company can use its stock to pursue and achieve strategic objectives including evaluating and effectuating acquisitions, raising capital and increasing the long-term attractiveness of equity compensation programs in a significantly more efficient and effective manner with significantly less dilution to existing stockholders;
- to improve Cablevision's access to debt markets and lower its overall financing costs; and
- to provide the Company with increased flexibility to fully pursue its business plan including capital expenditures and acquisitions that would be more difficult to consider or effectuate within Cablevision in the absence of the Distribution. This flexibility reflects the Company's belief that investors in a company with the mix of assets the Company will own following the Distribution will be more receptive to strategic initiatives the Company may pursue, such as the major renovation of The Garden and the acquisition or construction of additional theater venues. Certain investors in Cablevision have historically expressed concern for Cablevision's funding of strategic investments by its The Madison Square Garden Company segment.
Cablevision's board of directors also considered several factors that might have a negative effect on Cablevision as a result of the Distribution. Cablevision's board of directors considered that the Distribution would result in substantial reductions to the restricted payments baskets under various debt instruments of Cablevision and its subsidiary, CSC Holdings. Moreover, the Distribution would separate from Cablevision the businesses of the Company, which represent significant value, in a transaction that produces no direct economic consideration for Cablevision. Because the Company will no longer be a wholly-owned subsidiary of Cablevision, the Distribution also will affect the terms of, or limit the ability of Cablevision to pursue, cross-company business transactions and initiatives with The Madison Square Garden Company. Finally, following the Distribution, Cablevision and its remaining businesses will need to absorb corporate and administrative costs previously allocated to its The Madison Square Garden Company segment.
Cablevision's board of directors considered certain aspects of the Distribution that may be adverse to the Company. The Company's common stock may come under initial selling pressure as certain Cablevision stockholders sell their shares in the Company because they are not interested in holding an investment in the Company's businesses. Moreover, certain factors such as a lack of comparable public companies may limit investors' ability to appropriately value the Company's common stock. Because the Company will no longer be a wholly-owned subsidiary of Cablevision, the Distribution also will limit the ability of the Company to pursue cross-company business transactions and initiatives with other businesses of Cablevision. Finally, as a result of the Distribution, the Company will bear significant incremental costs associated with being a publicly held company.
In determining to move ahead with the Distribution, Cablevision has noted that certain aspects of its business and the business of the Company have changed since Cablevision's initial acquisition of The Madison Square Garden Company in 1995. When the initial acquisition was completed, The Madison Square Garden Company had certain synergies with Cablevision including its ownership of two important sports franchises, a major arena and a significant regional sports programming business, all in Cablevision's most important market — the New York metropolitan area. Over time, the business of the Company has expanded beyond its scope at the time of the initial acquisition to include multiple entertainment venues and expanded content. Also, at the time of the initial investment, Cablevision owned a portfolio of regional sports programming businesses in various major cities. Through a series of transactions all of those regional sports programming businesses other than the MSG Networks have been divested. As a result, the synergies associated with owning the MSG Networks have diminished. Finally, the planned renovation of The Garden and other possible growth initiatives such as the acquisition or construction of additional venues, will create significant funding requirements at the Company which are of a nature that did not exist at the time Cablevision made its initial investment in The Madison Square Garden Company.
Cablevision has received a private letter ruling from the Internal Revenue Service ("IRS") and expects to obtain an opinion from Sullivan & Cromwell LLP to the effect that the Distribution will qualify as a tax-free transaction under the Internal Revenue Code of 1986, as amended (the "Code"). Please refer to our Information Statement filed with the SEC for further information.
No. We currently intend to retain future earnings, if any, to finance the expansion of our businesses and ongoing operations. As a result, we do not expect to pay any cash dividends for the foreseeable future. All decisions regarding the payment of dividends will be made by our board of directors from time to time in accordance with applicable law.
There is not currently a public market for our common stock. Our Class A Common Stock will be listed on The NASDAQ Stock Market LLC under the symbol "MSG." It is anticipated that trading will commence on a when-issued basis prior to the Distribution. On the first trading day following the Distribution date, when-issued trading in respect of our Class A Common Stock will end and regular-way trading will begin. Our Class B Common Stock will not be listed on a securities exchange.
Yes. After the distribution of our Class A Common Stock, the trading price of Cablevision Group NY Class A Common Stock may be lower than the trading price of the Cablevision Group NY Class A Common Stock immediately prior to the Distribution. Moreover, until the market has evaluated the operations of Cablevision without the operations of The Madison Square Garden Company, the trading price of Cablevision Group NY Class A Common Stock may fluctuate significantly. Cablevision believes the separation of The Madison Square Garden Company from Cablevision offers its shareholders the greatest long-term value. However, the combined trading prices of Cablevision Group NY Class A Common Stock and The Madison Square Garden Company Class A Common Stock after the Distribution may be lower than the trading price of Cablevision Group NY Class A Common Stock prior to the Distribution. Please refer to our Information Statement filed with the SEC for further information.
If you have questions relating to the mechanics of the Distribution of shares of The Madison Square Garden Company common stock, you should contact the distribution agent:
Wells Fargo Shareowner Services, 161 North Concord Exchange, South St. Paul, Minnesota 55075-1139. Telephone: 1-800-401-1957.
Before the Distribution, if you have questions relating to the Distribution, you should contact: Cablevision Systems Corporation Investor Relations Dept., 1111 Stewart Ave., Bethpage, NY 11714-3581. Telephone: 1-516-803-2300.
After the Distribution, if you have questions relating to The Madison Square Garden Company, you should contact: The Madison Square Garden Company Investor Relations Dept., Two Penn Plaza, New York, NY 10121. Telephone: 1-212-465-6000.
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