MSG Files to Separate Its Sports, Entertainment Businesses -- 2nd Update

By Josh Beckerman 

Madison Square Garden Co. took another step in its spinoff efforts on Friday with a plan that would create two publicly traded companies using a different structure than the one it mentioned in October.

The company filed a registration statement to separate its sports and entertainment operations from its media business. MSG said in October that it would explore separating its entertainment businesses from its media and sports operations.

In December, the company said it would consider other structures, including a separation of media from sports and entertainment.

The company's sports business includes the New York Knicks and Rangers, while the entertainment business presents and hosts live events such as concerts. The media business includes the MSG regional sports TV networks.

MSG said Friday that "the separation would provide each company with increased strategic flexibility to pursue its own distinctive business plan," while still providing benefits from commercial arrangements between the companies.

A transaction structured as a tax-free spinoff is expected to take place during 2015, the company said.

MSG said it expects long-term rights agreements "will ensure MSG Network and MSG+ continue to serve as the exclusive local broadcast home of the Knicks and Rangers."

In after-hours trading, MSG shares were up 5.7% to $85.31.

MSG, which was itself spun off from Cablevision Systems Corp. in 2010, said in October that activist investor Nelson Peltz would join its board, along with Scott Sperling, co-president of private-equity firm Thomas H. Lee Partners.

Mr. Peltz, who runs Trian Fund Management LP, is known for pushing to split up companies, a trend that has gained momentum as investors have called for companies to focus on a few core businesses and shed other operations. Firms ranging from PepsiCo Inc. to eBay Inc. have faced such pressure from activists. EBay has announced breakup plans, while PepsiCo has reiterated that it has no interest in splitting up the company.

Earlier this month, MSG said Chief Executive Tad Smith resigned after a year in the post to become CEO of Sotheby's. James Dolan, who is MSG's chairman and the CEO of Cablevision, is overseeing MSG's activities as it searches for a new CEO.

In February, MSG said revenue for the December quarter rose 6.5% to $542.5 million. Its entertainment business posted a 19% revenue increase, while the sports segment had a 10% increase. Revenue at MSG Media fell 8%, reflecting the sale of Fuse Media to SiTV Media and a small increase in MSG Networks affiliation fee revenue.

Write to Josh Beckerman at [e-mail]

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