Madison Square Garden Entertainment (MSGE) is exploring a potential spin-off that would create a separately traded public company comprised of its traditional live entertainment business and the MSG Networks business.
The group’s board of directors has authorised its management to consider the move, which would see the separation of its performance venues, entertainment and sports bookings, Christmas Spectacular production and MSG Networks from its MSG Sphere and Tao Group Hospitality businesses.
MSGE – which was itself spun off from Madison Square Garden Company in 2020 – said the potential transaction would provide shareholders with greater investment choice and visibility into each company’s businesses and growth prospects, while enabling both companies to pursue distinct business and capital allocation strategies.
James L. Dolan, MSGE’s executive chairman and chief executive, said: “This potential transaction would create two companies, each with a distinct value proposition for investors.
“The live entertainment and media company would include Madison Square Garden, the Christmas Spectacular production and MSG Networks and would generate substantial free cash flow. The second company, comprised of MSG Sphere and Tao Group Hospitality, would be focused on unique shared experiences, innovation and global opportunities for growth.”
The live entertainment and media company is expected to include venues such as Madison Square Garden, The Hulu Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre and The Chicago Theatre. It would also feature its entertainment and sports bookings business, including concerts, family shows and special events which attract millions of guests annually.
The business would also include long-term Arena License Agreements with the New York Knicks and New York Rangers, who play at Madison Square Garden. Finally, it would feature MSG Networks, which owns two regional sports and entertainment networks, MSG Network and MSG+, as well as a companion streaming app, MSG GO, and features exclusive live local games of 5 NBA and NHL sports franchises.
After the proposed spin-off of the live entertainment and media company, MSGE is expected to include MSG Sphere, TAO Group Hospitality, an around one-third economic interest in the live entertainment and media company and the majority of the group’s cash on hand.
MSG Sphere is the division behind the state-of-the-art venues, the first of which is currently under construction in Las Vegas and expected to open in the second half of calendar 2023. A London venue is also planned. TAO Group is a global entertainment dining and nightlife provider, with over 70 branded locations within 60 venues across five continents.
MSGE said if it proceeds with the separation, it would be structured as a tax-free spin-off to all MSGE shareholders. In the first step of the transaction, record holders of MSGE Class A and Class B common stock would receive a pro-rata distribution expected to be equivalent, in aggregate, to an approximately two-thirds economic interest in the live entertainment and media company. The remaining approximately one-third economic interest in the live entertainment and media company would be retained by MSG Entertainment.
Madison Square Garden Company became MSG Sports after spinning off its entertainment business in 2020. The pure-play sports company includes the New York Knicks NBA team and the New York Rangers NHL franchise.