Aug. 5 (Bloomberg) -- Cablevision Systems Corp., the media company controlled by the Dolan family, may spin off its cable- television business, Madison Square Garden sports unit or its Rainbow Media TV networks. The stock rose 8.8 percent.

The company also said in a statement today it plans to pay a quarterly dividend or buy back shares after Chief Executive Officer James Dolan told investors last week that he was considering the moves to boost the stock. Before today, the shares had fallen 33 percent from a high of $38.52 last July.

Investor criticism of the Dolans mounted this year as Cablevision spent earnings from its New York-area cable service to buy the Sundance Channel and Long Island's Newsday newspaper. Mario Gabelli, Cablevision's third-biggest shareholder, recommends selling Rainbow Media, the unit that operates the AMC TV network, and using the proceeds to repurchase stock.

``We've wanted Jim Dolan to stop doing deals and share with shareholders,'' said Gabelli, whose Rye, New York-based Gamco Investors Inc. owned 8.3 percent of Bethpage, New York-based Cablevision as of March 31.

Cablevision jumped $2.27 to $28.20 at 4:15 p.m. in New York Stock Exchange composite trading. The stock jumped 14 percent on July 31 when James Dolan first said he would explore options and consider a dividend or buyback following better- than-expected quarterly results.

The company said today it would look at spinning off one or more businesses. Excluding any sales, Pali Capital analyst Richard Greenfield estimates Cablevision could still buy back up to 40 percent of its stock without increasing its debt load.

`Obvious Suspects'

James Dolan, 53, and his 81-year-old father, Chairman Charles Dolan, have offered to buy Cablevision four different times, most recently last year, when investors rejected a $36.26-a-share offer. Critics led by Gabelli said the bid undervalued the growth in cash flow from the main cable business, which regulatory filings said would more than double by 2010.

Rainbow may be worth $3.5 billion to $4 billion, said Chris Marangi, associate manager of the Gabelli Value Fund. The estimate is based on 2008 profit projections of $350 million to $400 million, and doesn't include the recently acquired Sundance Channel, Marangi said.

Liberty Media Chief Executive Officer Greg Maffei said he would consider Rainbow if it were put up for sale. The Englewood, Colorado-based company, controlled by billionaire John Malone, owns 48 percent of DirecTV Group Inc. and has said it wants to build programming assets around DirecTV.

``Like most opportunities in our space, if Rainbow is put on the market, we will look,'' Maffei said in an e-mail.

Potential Buyers

The list of buyers for Rainbow could include almost any media company that has cable networks, Miller, Tabak & Co. analyst David Joyce said. Time Warner Inc. may be interested because it is getting a $9.2 billion special dividend from the spinoff of Time Warner Cable Inc. later this year, he said.

``There are a lot of obvious suspects,'' said Joyce, who is in New York. ``You get a lot of economies of scale with your sales force if you have a menu to offer advertisers.''

Representatives for Time Warner, News Corp. and Viacom Inc. declined to comment.

Knicks, Rangers

Marangi values the Madison Square Garden unit at $2.5 billion. In addition to the arena next to New York's Penn Station, the division includes the New York Knicks basketball team, the Rangers hockey team and two cable sports networks.

John Moag, chairman of the sports investment bank Moag & Co. in Baltimore, said the sports teams and the MSG building on their own may fetch almost $2 billion.

``There will be dozens of people who look at that transaction,'' said Moag, who as chairman of Maryland's Stadium Authority helped build Oriole Park at Camden Yards. He said a buyer could boost the teams' value by building a new arena.

Cablevision didn't say which investment banks might represent it in any of the transactions, and spokeswoman Kim Kerns declined comment. In the buyout bid rejected last October, the Dolan family was represented by Bear Stearns Cos. and Merrill Lynch & Co. The company's board of directors retained Morgan Stanley and Lehman Brothers Holdings Inc.

The Dolan family may be moving now because taxes on dividends and capital gains are likely to rise if Democratic candidate Barack Obama is elected President, analyst Craig Moffett of Sanford C. Bernstein & Co. said. He said shareholders may question how serious the Dolans are.

``Investors are likely to take a wait-and-see attitude about whether the Dolans are truly ready to put their shareholder interests first, but the stars may be aligned this time,'' Moffett said in an e-mail.

Cablevision's $1 billion of 8 percent notes due in 2012 rose 0.6 cent to 97.6 cents on the dollar at 10:31 a.m. in New York according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt yields 8.8 percent, or 489 basis points more than similar-maturity Treasuries, Trace data show. A basis point is 0.01 percentage point.

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

Last Updated: August 5, 2008 16:20 EDT