Madison Square Garden Entertainment has agreed to acquire MSG Networks in an all-stock deal, setting up a re-combination of the two companies.
It said the deal would also allow it to “capture more of the emerging revenue opportunity related to the potential expansion of legalized sports gaming in its market.” After all, “the combination of the companies’ media, digital and venue assets creates a powerful platform for potential sports gaming partners, which is expected to generate significant incremental revenue in the years ahead,” it explained.
Both companies have long been part of the holdings of the Dolan family. Jim Dolan serves as chairman of both firms and as CEO of MSG Entertainment, which Madison Square Garden Sports spun off last year. Cable operator Cablevision in 2010 spun off the New York Knicks, New York Rangers, Madison Square Garden, MSG Network and other entertainment assets as a separate publicly traded company. In 2015, that company spun off the sports and entertainment operations as The Madison Square Garden Co., and renamed itself MSG Networks. The Madison Square Co. last year rebranded as Madison Square Garden Sports and spun off its entertainment division as MSG Entertainment.
“This transaction would create a leading entertainment and media company with a more diversified revenue base that would be well positioned to deliver innovative experiences across all of its assets,” the companies said. “The combined company would have a stronger liquidity position to support its live entertainment business, which following the shutdown of its venues due to the pandemic, is now on a path back to normal operations.”
They also said: “In addition, the new company would have enhanced financial flexibility to fund current growth initiatives, including its planned state-of-the-art venue in Las Vegas, MSG Sphere at The Venetian, as well as future opportunities across both entertainment and media.”
The fixed exchange ratio transaction is expected to be tax-free for both firms and their stockholders. Upon closing, MSG Networks stockholders would receive 0.172 shares of MSG Entertainment Class A or Class B common stock for each share of MSG Networks Class A or Class B common stock they own.
“The exchange ratio is approximately 4 percent above the ratio of the unaffected closing stock prices of the two companies on March 10,” the last trading day before a press report speculated on a potential transaction, the companies said.
Said MSG Entertainment president Andrew Lustgarten: “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. 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.”
MSG Networks president and CEO Andrea Greenberg said: “We anticipate significant benefits from rejoining MSG Entertainment, including creating a combined company with greater diversification and resources. This would, in turn, help drive new innovative opportunities across both the entertainment and media businesses, ultimately creating significant value for our collective shareholders.”
The two firms said their “diversified” merged company would have “enhanced financial flexibility” and could “realize meaningful tax efficiencies.”