Madison Square Garden Company Considers Split
The board approves a plan to explore a split for the live entertainment businesses and another for the media and sports businesses; it also approves up to $500 million in stock buybacks
The Madison Square Garden Company's board has approved a plan to consider splitting the company into two entities, one for the live entertainment business and the other for sports and media businesses.
The company on Monday also agreed to repurchase up to $500 million of its class A stock.
The discussions about breaking up MSG into two public companies has been going on since July, according to an announcement. If the spinoff is completed, it would be structured as a tax-free transaction.
Tad Smith, president/CEO of The Madison Square Garden Company, says the “live entertainment company would be a premier live event and venue management company with expertise in areas such as productions and other entertainment content, marketing, sales, and event operations. The sports and media company would be a leading company that fields championship caliber sports teams and has the rights to distribute sports content on multiple media platforms.”
“The first company,” added Smith in a statement, “would capitalize on significant opportunities to grow rapidly within the changing entertainment landscape. The second would enjoy steady growth and high cash flow that we expect will result in capital returns to shareholders."
The live entertainment company would include ownership of the famed Madison Square Garden in New York City, the Radio City Music Hall in Midtown Manhattan and the Forum in Inglewood, Calif., among other properties.
The live entertainment company also would include MSG booking, which creates and books live events held at the famous facility on New York City’s 34th St.; MSG productions, including the Radio City Christmas Spectacular; and New York Spring Spectacular, a large-scale theatrical production due to debut in spring 2015.
It also would encompass MSG venue management (including sponsorships, marketing, ticketing and promotion) and MSG’s strategic entertainment joint ventures.
The separate sports and media company would include MSG’s professional sports franchises: the New York Knicks, the New York Rangers and the New York Liberty, along with development teams the Hartford Wolf Pack and the Westchester Knicks.
It also would include the regional sports networks — MSG Network and MSG+; as well as MSG's interest in SiTV Media, the parent of NUVOtv and Fuse Networks.
There is no timetable for the split and the company warns it may never happen.
The latest in a series of stock buybacks will proceed as of Oct. 24. The company calls it “a reflection of our confidence in the strength of our businesses and demonstrates MSG's ongoing commitment to increasing shareholder value."
The company also announced, in anticipation of its annual meeting, the election of two new independent directors for the class A stock. They are Nelson Peltz and Scott Sperling. They replace Alan Schwartz and Vincent Tese, who have been nominated as directors by the company’s class B shareholders.
Peltz is CEO of Trian Fund Management, an investment firm. Peltz has a long history of running companies, in acquisitions and investments, including having headed Triac (Wendy’s); Snapple beverages; and Triangle Industries, parent of the American Can Co., among others.
Sperling is co-president of Thomas H. Lee Partners, a private equity firm he first joined in 1994. He has a long history in management and investments.
Richard Parsons also was re-elected as a director and now has been nominated for election by holders of the class A stock.
Parsons currently is senior advisor for Providence Equity Partners. He most recently was CEO of the Los Angeles Clippers after Donald Sterling was removed and until the team was sold. In the past his positions have included being chairman of Citigroup and CEO of Time Warner from 2003 until 2008.
"We have been considering the addition of new independent directors for some time,” said Jim Dolan, executive chairman of MSG Company, in a statement. “Backed by decades of business and investment experience as well as a genuine passion for our business, we are confident that Nelson and Scott will be valuable additions and sources of independent perspectives.”
MSG itself is a spinoff from Cablevision, a separate public company that also is controlled by Jim Dolan and his father, Charles Dolan, and other family members. MSG began trading as a public company in 2010. According to the announcement, it has seen the stock price increase more than 270 percent as of Oct. 27.
Among other accomplishments, MSG in that period has purchased and renovated The Forum in Inglewood, where it now programs events and concerts.
It also sold the Fuse network, which programs music videos, to SiTV Media, which is how it acquired that stake.
Among those applauding the idea of a split is JAT Capital Management, a New York investment company that holds about 9.4 percent of the MSG stock. JAT has been among those pushing the MSG management to make such a move. "We are very pleased," JAT said in a statement after the announcement, "that MSG’s board of directors and management have committed to pursue a plan to enhance value for all MSG shareholders."
UPDATE Oct. 27 5:59 p.m. pst - The story was update with the JAT Capital Management reaction.