MSG to Spin-Off Sports Franchises

MSG

Madison Square Garden Co. has filed with the SEC to spin-off its professional sports franchises into a new publicly traded company, with its live entertainment remaining under the MSG ticker. The division of assets (expected to be completed in H1 ’19) will “enable investors to more clearly evaluate each company’s assets and future potential, while providing both companies with increased strategic flexibility.” The filing reiterated the company does not intend on selling either of its marquee sports franchises (see: Knicks, Rangers), though it plans on unloading the WNBA’s New York Liberty.

Howie Long-Short: We’ve been waiting for this shoe to drop since the rumors first started flying in June. Upon the deal closing, MSG will consist of Madison Square Garden Arena, the Hulu Theatre at Madison Square Garden, Radio City Music Hall, Beacon Theatre, the Chicago Theatre, the Wang Theatre, the L.A. Forum, the Radio City Rockettes and the Christmas Spectacular, MSG’s booking business (think: college basketball, boxing), their majority stakes in Tao Group (62.5%) and Boston Calling (a festival/concert promoter), the company’s JVs (Azoff-MSG Entertainment and Tribeca Enterprises) and the planned Sphere projects in Las Vegas and London. “New” MSG will own 1/3 of the shares in the newly formed sports company and will retain $1 billion in cash. Legacy shareholders will control 2/3 of MSG Sports. Shares declined -3% on the news, closing at $300.62 on Friday 10.5.18.

In August, the company reported the percentage of revenue generated by its sports teams had dropped from 60% (last 3 years) to 50% in fiscal 2018, indicating Dolan’s diversification plan is working. MSG shares are up +42.5% YTD.

Fan Marino: The newly traded public company will be comprised of the New York Knicks (and their G-League affiliate the Westchester Knicks), the New York Rangers (and their AHL affiliate the Hartford Wolf Pack), their majority stake in Counter Logic Gaming, Knicks Gaming and a training facility in Greenburgh, NY. Dolan intends on running both companies, so fans shouldn’t expect many (if any) changes to team operations.

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Author: John Wall Street

At the intersection of sports & finance.

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