Oct. 24 (Bloomberg) -- Cablevision Systems Corp. shareholders rejected the Dolan family's proposed $10.6 billion takeover after the founders of the New York-area cable-television company refused to raise their offer or sell to other buyers.

Chief Executive Officer James Dolan delivered the preliminary results of the shareholder vote at a meeting today in Bethpage, New York. He and his father, Chairman Charles Dolan, have tried to buy Cablevision for the past two years.

``The offer left a lot of money on the table,'' said Chris Marangi, an associate manager for the Gabelli Value Fund that opposed the Dolans' takeover plan. ``The fact the meeting was over in about 20 minutes indicates the vote wasn't close.''

Holders of 36 percent of voting shares had criticized the $36.26-a-share bid, saying it undervalued the company. They were at odds with the Dolans over the value of assets including Madison Square Garden and Rainbow Media, owner of the American Movie Classics, WE and IFC cable channels. Mario Gabelli, the second-biggest institutional shareholder, said the deal would have shortchanged investors by as much as $6 billion.

Gabelli, whose Gamco Investors Inc. holds 8.3 percent of Class A shares, and Legg Mason Inc.'s ClearBridge Advisors LLC, the biggest institutional investor, voted against the bid. T. Rowe Price Group Inc., Cablevision's third-largest holder, also rejected the proposal, spokesman Steve Norwitz said. Together the three firms held 28 percent of shares eligible to vote.

Cablevision shares fell $1.04, or 3.3 percent, to $30.82 at 4 p.m. in New York Stock Exchange composite trading. The stock has fallen 5.7 percent since the Dolan family's offer in May, paring share gains this year to 8.2 percent.

`Great Optimism'

``Both sides have great optimism about the company's future,'' James Dolan said during the meeting.

The Dolans, who control a 20 percent stake and didn't vote today, said last week they are ``completely prepared'' to continue running Cablevision as a public company rather than raise or modify their bid.

The risk of owning Cablevision's bonds dropped to the lowest in more than three months, according to credit-default swap traders who bet on creditworthiness. Five-year contracts fell 53 basis points to 327 basis points, according to CMA Datavision in London.

In a Sept. 25 filing, Cablevision said cash flow will be $32 million below budget this year as its business deteriorates amid competition from New York-based Verizon Communications Inc. The company cut its 2007 forecast Aug. 8.

Bad Business?

``They're suddenly downplaying a business they were thrilled with three to six months ago,'' Dan Martino, an analyst at Baltimore-based T. Rowe Price, said before today's meeting.

In a filing on Sept. 14, the cable-TV provider predicted 2007 free cash flow would double to $2.56 billion by 2010 as profit jumps 12-fold at the MSG and Rainbow units.

The biggest gap between the Dolans and their opponents was in valuing businesses other than Cablevision's television, Internet and phone service. Gabelli and T. Rowe Price said MSG and Rainbow are worth $6 billion or more.

``The stock will double over the next three to four years without a deal,'' Gabelli said in an interview yesterday ahead of the vote. Madison Square Garden and the cable channels are worth more than the $4.8 billion allotted in the Dolans' bid, he said. The Dolans ``want to buy it on the cheap.''

To contact the reporter on this story: Tim Mullaney in New York at Tmullaney1@bloomberg.net

Last Updated: October 24, 2007 16:42 EDT