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MSG Considering Spinning Off Sports Teams, Shares Hit All-Time High
Madison Square Garden (MSG) is considering a tax-free spinoff of the Knicks, Rangers and other pro sports franchises (to be known as MSG Sports) from Madison Square Garden Arena, Radio City Music Hall and the balance of their concert-hosting and entertainment-venue operations. The proposed plan would give legacy shareholders 66% of MSG Sports. MSG would retain the remaining 33%. No timetable has been issued for the board to issue a decision. MSG shares hit an all-time high on Thursday, closing at $303.29.
Howie Long-Short: Should a split occur, MSG Sports would include the Knicks, Rangers, Westchester Knicks (G-League), Hartford Wolf Pack (AHL) and the Liberty (WNBA), though the team has been exploring a sale for that franchise on and off since November. The newly-formed entity would also include Knicks Gaming (NBA 2K League) and Counter Logic Gaming (esports).
MSG would hold on to Madison Square Garden and the Hulu Theatre, Radio City Music Hall, Beacon Theatre, the Forum in Inglewood, the Chicago Theatre and the Wang Theatre (Boston). The company’s hospitality group, a music festival producer, interests in Oak View Group development projects, stake in Tao Group (62.5%) and $1 billion in cash would also remain under the MSG umbrella.
JWS wrote about the need for a potential spinoff back in October and we again discussed how MSG’s market cap was lower than Forbes value of just the Knicks and Rangers in February; so, we’re on board with a spinoff that would bring full value of company’s assets to shareholders. We noted in October that there was speculation a spinoff could increase the value of the company by upwards of +25%; reports of the potential plan occurred on Wednesday evening, shares have skyrocketed +13.9% since.
Fan Marino: Sorry Knicks Fans, a spinoff doesn’t mean that James Dolan would finally relinquish control of the struggling NBA franchise; Dolan intends on serving as executive chairman and CEO of both companies.
Knicks fan looking for some good news? Kentucky HC John Calipari believes 1st round selection Kevin Knox is the league’s next Jason Tatum; “a tough, a skilled, long, tough player who’s a future All-Star.”
Disney Agrees to Divest 22 Regional Sports Networks
The Department of Justice has approved The Walt Disney Company’s (DIS) $71.3 billion ($38/share, increased bid from $52.4 billion, includes +/- 50% in cash) acquisition of 21st Century Fox (FOXA) television and film assets, after reaching a settlement with DIS that calls for the company to divest FOXA’s 22 regional sports networks. U.S. A.G. (Anti-Trust Division) Makan Delrahim, concerned DIS’ control of the RSNs would create a potential monopoly, said that the settlement ensures “sports programming competition is preserved in the local markets where Disney and Fox compete for cable and satellite distribution.” The settlement, which requires DIS to divest the RSNs within 90 days of closing, requires approval from a judge; but that is a formality. DISintends on pursuing a 3rd party buyer for the RSNs, as opposed to submitting a new offer; FOXA is not thought to be interested in retaining the assets.
Howie Long-Short: DOJ approval gives DIS an advantage over Comcast (CMCSA) in the competition for the Murdoch empire, just two weeks after Comcast submitted an all-cash bid worth $65 billion ($35/share). While the approval alone won’t win DIS the assets (Comcast is expected to submit a counter offer), it won’t hurt considering it’s been thought the FOXA board has long preferred to sell the assets to DIS in the belief the Comcast bid is bound to face anti-trust concerns. That’s debatable. CMCSA would also divest the RSNs and FOXA’s stake in Hulu is really the only asset that might draw anti-trust concerns; and that doesn’t appear to be a major hurdle. It’s been thought FOXA assets could draw upwards of $43/share.
It should be noted that if the DIS deal goes through as is, FOXA shareholders would own 19% of the joint company. FOXA shares are up +11% (to $49.79) since DIS submitted their latest offer on June 20th; DIS hasn’t fared as well, the stock is down -1.25% (to $104.77) over that same period.
Fan Marino: While the Yankees are likely to repurchase YES Network, that still leaves 21 RSNs and a lot of regional sports broadcast rights for taking. Sure, it’s possible that FAANG will pursue exclusive broadcast rights, I would bet on an established linear player making a play to acquire the 5th most important channel on a subscriber’s cable package. CBS (think: CBS Sports HQ), Turner Sports (T, B/R Live) and Discovery Communications (DISCA, which has made a significant push for rights in Europe) are all possible landing spots.
What is JohnWallStreet?
JohnWallStreet, located at the intersection of sports and finance, is a destination for the educated sports fan.
While we won’t be publishing “hot takes” on LeBron’s relative greatness to Jordan, we will be offering up the most relevant sports related business news, in easily digestible bites, with commentary from both the sports money and sports fanatic perspectives.
We’ll cover publicly traded professional teams & stadiums (MSG, RCI, BATRA, MANU), television networks (DIS, FOXA, CMCSA, CBS, TWX, MSGN), apparel & footwear companies (NKE, UAA, ADDYY, FL, LULU), equipment companies (GOLF, ELY, FIT), ticketing companies (EBAY, LYV) content and facilities providers (CHDN, DVD, ISCA,TRK, LMCA). If it trades on Wall Street, and has a sports angle, it’s in our wheel house.
Howie Long-Short and Fan Marino will be providing their expert opinions on each story. They have slightly different areas of expertise. Fan Marino is a firm believer that the SEC is the premier football conference. Howie Long-Short knows it as the Securities & Exchange Commission. Fan Marino lives and dies with the college selection of 5 star, blue chip recruits. Howie Long-Short spends his days analyzing blue chip stocks. Howie Long-Short knows that Black Monday occurred on October 19th, 1987. Fan Marino swears it happens every January after Week 17. You get the point.