Cablevision Systems announced a one-two punch to acquire Bresnan Communications for $1.37 billion and repurchase $500 million of its own stock, sending shares up 6.2 percent as investors cheered moves to expand its business while rewarding shareholders.

Cablevision, the fifth largest cable operator, will acquire Bresnan from majority owner Providence Equity Partners in a deal that will bring it 300,000 additional subscribers in Colorado, Montana, Wyoming and Utah.

That expands Cablevision well outside its current business in New York, New Jersey and Connecticut, and gives its toehold in the less competitive communications services markets in the mountain states of the west.

Cable is what Cablevision does best, said Christopher Marangi, an analyst with Gabelli & Co. These are both good uses of capital.

During a conference call with investors, Cablevision Chief Operating Officer Tom Rutledge, who will head up Bresnan, said, We think that we can provide better services in all three categories in our triple play product set at lower prices than people are paying, increasing our revenue and marketshare.

Cablevision executives described Bresnan's properties -- mostly in smaller rural communities -- as very well managed. They also pointed to Bresnan's 48 percent market penetration, compared with its satellite competitors with a combined 38 percent share.

Gabelli's Marangi said deals in the cable sector -- including Abry Partners' purchase of RCN for $1.2 billion in March -- underscores our belief that public cable companies are dramatically undervalued.

Shares of Cablevision are up nearly 10 percent this year, outpacing the broader Standard & Poor's-500. Among the other major cable companies, Comcast Corp shares have risen nearly 8 percent and Time Warner Cable Inc shares are up almost 30 percent.

Cablevision executives, meanwhile, stressed on the call that the company is not in the market for every cable company up for sale.

Cablevision's most recent agreement stands in contrast to prior deals the company has made. In 2008 the company acquired the Melville, N.Y.-based newspaper Newsday from the Tribune Co for $650 million only to write down the deal by more than half of the value a year later.

The Bresnan deal was reported on Sunday [ID:nN13126575]. It is expected to close in late 2010 or early 2011. Cablevision expects to finance the deal using non-recourse debt of about $1 billion and an equity investment by Cablevision of less than $400 million.

Citigroup acted as lead financial advisor to Cablevision while UBS AG and Credit Suisse advised the sellers.

Providence Equity Partners, which bought Bresnan in 2003 for $525 million, put the company up for sale in March. Seven companies made bids for Bresnan including Suddenlink Communications and media mogul John Malone, according to sources. Minority stakeholders in Bresnan include Comcast Corp and the private-equity firm Quadrangle Group.

Bresnan Communications was founded in 1984 by cable pioneer veteran William Bresnan, who died in 2009. During his long career, Bresnan served as the chairman and chief executive of Group W Cable and was responsible in playing a major role in the development of the commercial fiber optic communications system.

Shares of Cablevision are up $1.45 to $24.85 in afternoon trade on the New York Stock Exchange.

(Reporting by Jennifer Saba; Editing by Derek Caney)