Madison Square Garden Spinoff Plan Sends Shares to Record High
The proposal would split sports teams from MSG’s live-entertainment operations and be structured as a tax-free deal.
(Bloomberg) -- Madison Square Garden Co. is looking to spin off its pro-sports franchises, including the New York Knicks and New York Rangers, a bet that it can wring more value from the iconic teams if they’re an independent business.
The proposal would split off the sports teams from MSG’s live-entertainment operations and be structured as a tax-free deal, the company said on Wednesday. Shareholders would receive a two-thirds economic interest in the Knicks and Rangers, as well as the New York Liberty, a women’s professional basketball team that the company has been trying to sell.
The decision sent the shares up as much as 13 percent to $300.88 on Thursday, an all-time high. The announcement also earned a ratings upgrade from Jefferies LLC analyst John Janedis, who is valuing the Knicks at $3.7 billion and the Rangers at $1.6 billion.
Madison Square Garden “possesses a collection of unique, world class sports and entertainment assets which are largely underappreciated by investors,” Janedis wrote in a note. Spinoffs would unlock the value of the parts, which are scarce, high-value assets, he said.
The live-events company would keep famous venues such as Madison Square Garden and Radio City Music Hall, as well as a hospitality group, a music festival producer and about $1 billion in cash. The New York-based company plans to open new venues in Las Vegas and London in coming years.
James L. Dolan is expected to be executive chairman and chief executive officer of both companies. The split will let shareholders better evaluate each set of assets while allowing them to pursue their separate strategies, the company said.
The new entity would be publicly traded and serve as “a pure-play sports company driven by the strong financial performance of the storied Knicks and Rangers franchises,” Dolan said in a statement.
The proposed split marks the latest shake-up in the Dolan empire. Last fall, David “Doc” O’Connor stepped down as CEO of Madison Square Garden. In 2015, the company separated its regional sports networks from its live sports and entertainment businesses.
Madison Square Garden’s stock has climbed in the past year, partly due to the rising valuation of the Knicks. Other National Basketball Association teams, such as the Houston Rockets, have changed hands in multibillion-dollar deals, bringing a brighter halo to the rest of the league.
--With assistance from Karen Lin.
To contact the reporter on this story: Gerry Smith in New York at gsmith233@bloomberg.net
To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Rob Golum
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