October 9, 2018 / 7:17 PM / 7 months ago

Breakingviews - The Dolans are better at spinoffs than coaching

The Rockettes at the 71st Tony Awards – New York City, U.S., 11/06/2017 - . REUTERS/Carlo Allegri

NEW YORK (Reuters Breakingviews) - The Dolans are proving they’re better at spinoffs than coaching. The family, which controls the almost $7 billion Madison Square Garden Co, is separating yet another business from its empire. This time it’s cleaving off the New York Knicks and Rangers from the Rockettes. The sports team may win no trophies, but the deal could be a slam dunk for shareholders.

The Knicks may be hapless – the team last won the top NBA title in 1973 – but ranks as the association’s most valuable team three years in a row at an estimated $3.6 billion, according to Forbes. Meanwhile its stadium mate, hockey’s New York Rangers, clocks in at some $1.5 billion.

Hiving off these two franchises would leave MSG with venues including its eponymous arena in midtown Manhattan, the Radio City Rockettes dance troupe, the bookings business and an initiative to build out immersive venues in Las Vegas and London. In the year to June 30 this entertainment division made $117 million in adjusted operating income for the year ended June 30.

Applying rival Live Nation Entertainment’s 20 times multiple puts the enterprise value of the rump MSG business at some $2.3 billion. Throw in the sports teams and add back $1 billion in net cash and the sum of MSG’s parts comes to $8.4 billion in equity.

That’s 23 percent higher than its market capitalization on Monday – and a third higher than where it stood when the Dolans first floated the idea in June.

If the deal goes ahead, it’ll be the second time that MSG will have been whittled down. In 2015, the family separated out its regional sports cable channel MSG Networks from Madison Square Garden, creating more than $3.5 billion in market value. Some four years earlier they sliced Cablevision from AMC Networks and sold the former to Altice for almost $18 billion.

The Dolans’ backing has done nothing to skate the Rangers to Stanley Cup success or pass an NBA championship to the Knicks. But they know how to coax a good performance out of their financial transactions.


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