Madison Square Garden Co. Stock Soars on Talk of Split

Board is exploring separating sports teams from venues
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Shares of Madison Square Garden Co. stock continued to soar Friday – up more than 3% -- as the sports teams and concert venue company draws nearer to a possible split.

Madison Square Garden shares were up 3.4% ($10.36 per share) to $313.65 on Friday afternoon, their second day of gains after the company’s board of directors said it was exploring a possible split of its professional sports teams – including the New York Knicks, New York Rangers, and New York Liberty – into a separate company. The stock is up almost 18% from its $266.23 level prior to the June 27 announcement.

Related: Cablevision Sets Feb. 9 Spin Date

Madison Square Garden, helmed by former Cablevision Systems CEO James Dolan, has been down this road before. In 2010, MSG, including the teams, the venues, and its MSG Networks regional sports channels were spun-off from Cablevision Systems. In 2015, the company split again, into Madison Square Garden Co., which included its sports teams and concert venues like Radio City Music Hall, and MSG Networks, which includes regional sports channels MSG and MSG-Plus. 

Related: MSG Moves Ahead With Split Plans

The Dolan family sold Cablevision to Altice N.V. in 2016. 

“We believe this proposed transaction would provide each company with enhanced strategic flexibility, its own defined business focus and clear investment characteristics,” Dolan said in a statement.

Any separation would be a tax-free spin-off, with shareholders of MSG common stock receiving a pro-rata distribution equivalent to a two-thirds stake in the pure-play sports company. The remaining one-third interest would be retained by the live entertainment company. Dolan would be the executive chairman and CEO of both companies.

“We are exploring the opportunity to further create value by separating our businesses into two distinct companies,” Dolan said in a statement. “One company would be a leader in live entertainment with a growing portfolio of assets that will include state-of-the-art music and entertainment-focused venues – called MSG Sphere. The other entity would be a pure-play sports company driven by the strong financial performance of the storied Knicks and Rangers franchises. We believe this proposed transaction would provide each company with enhanced strategic flexibility, its own defined business focus and clear investment characteristics.

The pure-play sports company would consist of:

  • The New York Knicks professional NBA sports franchise and its development team, the Westchester Knicks;
  • The New York Rangers professional NHL sports franchise and its development team, the Hartford Wolf Pack;
  • The New York Liberty professional WNBA sports franchise, for which the Company is exploring a sale;
  • A professional sports team Training Center in Greenburgh, NY.

The live entertainment company would include:

  • Live venues New York’s Madison Square Garden, The Hulu Theater at Madison Square Garden, Radio City Music Hall and Beacon Theatre; the Forum in Inglewood, CA; The Chicago Theatre; and the Wang Theatre in Boston;
  • MSG Bookings, which books live sporting events such as college basketball and professional boxing;
  • MSG Productions, which includes the Radio City Rockettes and the Christmas Spectacular;
  • Majority interests in hospitality group the TAO Group and Boston Calling Events, producer of New England’s Boston Calling Music Festival;
  • Entertainment joint ventures -- Azoff-MSG Entertainment and Tribeca Enterprises;
  • One-third economic interest in the pure-play sports company; and
  • $1 billion in cash on hand.

The live entertainment company will also continue to move forward with plans to create state-of-the-art venues – called MSG Sphere. The goal is to open the first MSG Sphere in Las Vegas by the end of calendar 2020, followed by a second MSG Sphere in London approximately one year later.

J.P. Morgan and PJT Partners are serving as financial advisors and Sullivan & Cromwell LLP is serving as legal advisor.

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