Madison Square Garden Co. yesterday announced it will "explore separating its entertainment businesses from its media and sports operations, becoming the latest in a string of companies to look into cleaving themselves in two," according to Beckerman & Benoit of the WALL STREET JOURNAL. The company’s sports and media businesses include the Knicks, NHL Rangers, WNBA Liberty and the MSG Net RSNs. The entertainment business "presents and hosts live events such as concerts." MSG President & CEO Tad Smith in a statement said, "Investors favor companies with greater strategic focus on their core businesses." He added the live entertainment company "would capitalize on significant opportunities to grow rapidly within the changing entertainment landscape," while the sports and media company "would enjoy steady growth and high cash flow that we expect will result in capital returns to shareholders." Splitting up MSG, which has a market capitalization of about $5B and generated revenue of $1.6B in the fiscal year ended June 30, would be MSG Chair James Dolan's "latest move ... to restructure the media and entertainment assets his family controls." MSG itself "was spun out of Cablevision" in '10. The company said that shareholders "would own shares in both new companies" in the event of a split (WALL STREET JOURNAL, 10/28). There is "no timetable for the split and the company warns it may never happen" (HOLLYWOODREPORTER.com, 10/27). VARIETY's Brian Steinberg noted MSG "intends to explore the notion of coupling the event-management businesses associated with its operation of Madison Square Garden, the Beacon Theater and Radio City Music Hall and separating them from its sports teams, regional sports cable outlets and stake in SiTV, which operates the Fuse and Nuvo TV entertainment networks" (VARIETY.com, 10/27). At presstime, shares of MSG were trading at $72.90 a share, up 10.8% from the close of business yesterday (THE DAILY).
SPLIT DECISION: MSG in its statement said that it "had been considering the latest spin off since July." The company also said that its BOD "has authorized the repurchase" of up to $500M in Class A Common stock and "announced director nominees for this year’s annual board meeting, including two new independent directors" in former Triarc Chair & CEO Nelson Peltz and Thomas H. Lee Partners co-President Scott Sperling, who will replace MSG BOD Dir Alan Schwartz and former New York State Economic Development Dir Vincent Tese. MULTICHANNEL NEWS' Mike Farrell wrote the idea to split MSG "could have been spurred by the recent spike in valuations" in NBA teams after former Microsoft CEO Steve Ballmer paid $2B for the Clippers (MULTICHANNEL.com, 10/27). CNBC's Andrew Ross Sorkin said the goal of splitting MSG into two publicly traded companies is to "unlock value" in the Knicks and Rangers and "buoy its entertainment business." Gamco Investors Chair & CEO Mario Gabelli said it will allow Dolan, "who has a passion and love for sports but also a passion and love for music, to pursue other ventures in the live entertainment area" ("Squawk Box," CNBC, 10/28). CNBC's David Faber said if a split does occur, the teams would be split off separately, which "would give greater clarity to the value of the teams" and MSG Net. Faber: "Then the question becomes does the company ever really consider selling the teams? Jim Dolan loves his music, that's the part of the business he loves. He really does seem to have handed over control of the Knicks to Phil Jackson to a certain extent. I mean, he's the owner but he's not making the decisions any longer. Jackson seems to be so there is a possibility if this were to happen a year down the road you could conceivably see a sale" ("Squawk on the Street," CNBC, 10/28).
