Current MSG shareholders will receive shares the sports and entertainment business by way of a tax free spinoff, which is expected to be completed in by the end of 2015.
Besides the Knicks, Rangers and Garden, the sports and entertainment business includes Radio City Music Hall and its famous Christmas Spectacular, the Beacon Theater, the Theater at Madison Square Garden and other entertainment venues in Boston, Chicago and Los Angeles. The company's media business centers on regional sports networks that broadcast the Knicks and Rangers, in addition to some original programming.
In fourth quarter, MSG's media business generated $166 million in revenue, an over 8% decline, while its MSG Entertainment and MSG Sports divisions reported a combined $396 million in revenue, an over 14% year-over-year increase.
"[W]hile MSG has created significant shareholder value since it was established as a public company five years ago, separating MSG's live sports and entertainment businesses from its media business now would further enhance the long-term value-creation potential of both businesses," MSG said of its decision to split apart.
Once separated, each independent company will also have the ability to set its own business and capital plans, MSG said. The move also will give shareholders a better ability to evaluate the prospects of MSG's various businesses. MSG Network will continue to broadcast the Knicks and Rangers as part of the separation, and the company said on Friday it expects to enter into a long-term media rights agreement to continue to serve as the exclusive local broadcast home of the Knicks and Rangers.
Friday's split announcement continues a trimming down of the billionaire Dolan family's sports and media empire, which also includes New York-area cable giant Cablevision Systems. The Dolan family is estimated by Forbes's Real Time Wealth Tracker to have a net worth of $4.2 billion..
After years of shareholder pressure, the Dolan's split MSG from Cablevision in 2010. MSG shares have risen over 300% since being spun, nearly quadrupling the S&P 500 Index. In 2013, Madison Square Garden completed $1 billion, three-year renovation, and the company's also benefited from rising valuations across sports and real estate. However, shares in Cablevision have gone the other way. Since the MSG spin, Cablevision shares have fallen by over 30%.
Executive chairman James Dolan, son of Cablevision founder Charles Dolan, recently retook MSG's CEO job after the sudden resignation of Thomas S. Smith, who left the company after just a year at its helm to run auction house Sotheby's.
Dolan, a staple of New York sports and gossip pages, has received criticism for his management of the Knicks. The popular NBA team is currently mired in one of the worst season's in its history, a season so poor Dolan made national press by telling a critical longtime fan to root for crosstown rival The Brooklyn Nets. However, as a result of their poor play, the Knicks stand poised to have one of the top picks in upcoming NBA draft .
Conversely, after making the Stanley Cup finals in 2014, the Rangers are currently the top team in the National Hockey League and a top contender to win the Cup.
MSG shares were trading higher by nearly 5% in after-hours trading at $84.50.
