Madison Square Garden Confirms Plan To Spinoff Knicks and Rangers To Unlock Value for Investors
- Posted on December 03, 2019
- Stock Spinoff
- By admin admin
Madison
Square Garden Co., owner of the eponymous arena and other venues have approved a
plan to spinoff all of its sports and entertainment businesses, including New York Knicks and
Rangers.
The
whole idea of separating its assets is to unlock value. The combined worth of
Knicks and Rangers is about $7,2 billion; this is according to the Blue Harbour
Group, which owns a 4% stake in Madison Square Garden. That is 10% higher than
the market value of MSG as a whole.
On October 4, 2018, The Madison Square Garden
Company made an announcement that it has
made progress towards the spinoff of its sports business by filing a
confidential initial Form 10 Registration Statement with the U.S. Securities
and Exchange Commission. In a statement,
MSG wrote:
“The proposed separation
of the sports and entertainment businesses would enable investors to more
clearly evaluate each company’s assets and future potential, while providing
both companies with increased strategic flexibility to pursue their own
distinctive business plan and capital allocation policy.
This is a version of the
token corporate line that all companies include when announcing a spin-off. And
similar to most other spin-offs, we can cut through the language and home in on
what’s important: valuation. At the end of the day, management thinks the
company’s assets are worth more than is reflected in MSG’s stock price.
The MSG investment thesis
for a long time has been based on a sum of the parts analysis, and the spin-off
will highlight the disconnect between MSG’s stock price and the value of its
assets."
According
to the Chief Executive Officer, Jim Dolan, "one company would be a leader
in live entertainment that would take advantage of significant opportunities to
grow rapidly within the changing entertainment landscape, while the other
entity would be a sports company with marquee assets that would enjoy steady
growth and strong free cash flow."
Therefore,
it is expected that the breakup should not affect the Dolan family's control of
both operations, as shareholders will keep their current economic interest in
the new businesses under the plan.
On
November 8, the shares seemed unaltered in the New York trading and the MSG
company has gained about 4.4% in the whole of 2019, resulting in a market
valuation of $6.68 billion.
It
was reported that MSG separated its media operations, MSG Networks Inc., which
broadcasts the Knicks and the Rangers games, in 2015 and is worth about $1 billion.
According
to Bloomberg: "the separation of the two entities, without a third stake
is expected to make the sports business more attractive to investors. In
addition to the NBA's Knicks and NHL Rangers, the new sports company will
include some video-gaming teams, two minor-league Franchises and a training
center in Greenburgh, New York. The entertainment company would have New York's
MSG arena, the Hulu Theater, Radio city, Music Hall and Beacon Theater; the
Forum in Inglewood, California; and the Chicago Theater."
With
this spinoff agenda, it is advisable for potential investors to be on the
lookout to unlock the special benefits associated with spinoffs.
Open | 282.58 |
High | 282.58 |
Low | 277.70 |
Mkt cap | 6.67B |
P/E ratio | - |
Div yield | - |
Prev close | 281.78 |
52-wk high | 315.95 |
52-wk low | 240.33 |
Be the first to comment!
You must login to comment