Almost six years after splitting the company to unlock value, Madison Square Garden Entertainment said it has agreed to combine with MSG Networks in a tax-free exchange of shares.
The recombination is expected to bolster MSG Entertainment, which includes Madison Square Garden arena, Radio City Music Hall and other venues that have been hit hard as the pandemic has shut down the concert business. The entertainment unit is building a state-of-the-art facility in Las Vegas -- MSG Sphere at the Venetian -- which is scheduled to open in 2023. The company also has said it plans to build a second MSG Sphere in London, pending necessary approvals.
The company said the combination of the entities’ media, digital and venue assets should help MSG Entertainment capture a greater share of the burgeoning sports gaming business. Some analysts have estimated sports gaming could become a $12 billion business by 2025. MSG Networks controls two regional sports networks -- MSG Network and MSG Plus.
“MSG Entertainment is actively executing a plan designed to grow the Company beyond its established collection of assets into one that is pioneering the next generation of entertainment,” MSG Entertainment CEO Andrew Lustgarten said in a press release. “We have always believed in the value of live sports and look forward to welcoming MSG Networks back into the fold as part of a transaction that we are confident would enhance our financial flexibility and set the stage for continued growth and value creation.”
The deal is expected to close in the third quarter. Moelis & Company LLC and The Raine Group are serving as independent financial advisors and Wachtell, Lipton, Rosen & Katz is serving as independent legal counsel to the Special Committee of the Board of Directors of MSG Entertainment. LionTree Advisors LLC and Morgan Stanley & Co. LLC are serving as independent financial advisors and Davis Polk & Wardwell LLP is serving as independent legal counsel to the Special Committee of the Board of Directors of MSG Networks. Debevoise & Plimpton LLP is serving as legal counsel to the Dolan family.
The two companies were originally part of Cablevision Systems Corp. which spun off MSG -- including its professional sports teams and regional sports networks unit -- in 2010. In 2015, the assets were split into The Madison Square Garden Co., which included the teams and concert venues, and MSG Networks, housing the RSNs. In 2020 The Madison Square Garden Co. split again into MSG Entertainment, housing its concert venues, and MSG Sports, which included its professional sports teams. Cablevision was sold in 2016. MSG Sports continues to be a separate entity.
According to the deal, MSG Networks shareholders will receive 0.172 shares of MSG Entertainment Class A or Class B stock for each share of MSG Networks they own.
