Madison Square Garden Entertainment Acquires MSG Networks Sibling In All-Stock Deal

Madison Square Garden Entertainment has reached an agreement to acquire MSG Networks in an all-stock deal, confirming long-simmering press speculation.

The revenue potential of sports betting is a big factor in the transaction, which also aims to stem losses suffered on the entertainment side during the coronavirus pandemic. The two entities had been part of the same company before being separated in 2015.

The merger is expected to close in the third quarter. Under its terms, 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.

MSG Networks stock is valued at $16.16 a share in the deal, 7% below current levels. The companies described it as a 4% premium to the closing price for MSG Networks on March 10, which was the date of the initial press report speculating about the merger. The disparity caused MSG Networks shares to drop 5% in pre-market trading.

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MSG Entertainment controls New York’s Madison Square Garden, plus productions like the Radio City Rockettes and the Christmas Spectacular. It also has a majority stake in Tao Group Hospitality. It reported losses of $250 million in 2020, though limited numbers of fans are starting to return to New York Knicks and Rangers home games.

MSG Networks operates two regional sports networks, MSG Network and MSG+. They carry exclusive games featuring the Knicks, Rangers, New York Islanders, New Jersey Devils and Buffalo Sabres.

The Dolan family, media potentates for decades in New York and former owners of Cablevision (now Altice USA) continue to control the MSG properties.

As trying as times have been for the live event business, regional sports networks have also been battling cord-cutting and other challenges, even before Covid-19. On the upside, the winning ways of the Knicks lately have helped ratings post year-over-year improvements over 2019-20 levels.

The deal announcement said new ventures will be more feasible under the combined structure. One example is a long-in-the-works entertainment venue in Las Vegas, MSG Sphere at The Venetian, whose economics have long caused head-scratching among many investors.

“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 President Andrew Lustgarten said. “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 her group expects “significant benefits” from rejoining MSG Entertainment. “Creating a combined company with greater diversification and resources,” she said, “would, in turn, help drive new innovative opportunities across both the entertainment and media businesses, ultimately creating significant value for our collective shareholders.”

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