Jefferies Cuts Cablevision, Believes 'M&A Is Required Here'

In a report published Friday, Jefferies analyst Mike McCormack downgraded the rating on

from Buy to Hold, while maintaining the price target at $24, saying that the company's stock reflected "some degree of M&A optimism." Analyst Mike McCormack believes that a suitor for Cablevision could pay a premium to current share price and "still realize meaningful value from an acquisition." The conservative forecast for opex synergies is more than ~$400mn and for capex synergies is $50mn, "providing a significant lift to FCF per share estimates." In the report Jefferies noted, "We have long believed that tax implications would be an important factor in any potential transaction involving Cablevision…However, given the need to include a meaningful equity component to ensure tax benefits, we believe Cablevision may be somewhat selective when assessing potential suitors." McCormack cited

as a "logical acquirer," highlighting the "anticipated geographic congruity," while stating that its on-going regulatory approval process could push any potential transaction "into 2016, at the earliest." Cablevision's shares have climbed almost 15 percent in the last month, outperforming peers. "We believe the move reflects an M&A premium, particularly following comments from industry consolidators. While our M&A analysis suggests more room to run, uncertainty around timing and a willingness to sell keeps us grounded," McCormack wrote. "We believe that the shares could be worth as much as $33 should a transaction occur, but see uncertainty around timing and the Dolan's family willingness to sell," the report added.