Madison Square Garden Split Drives Dealmaking Speculation

Why would Charles and James Dolan split Madison Square Garden into two companies if they weren’t determined to sell one of them, lots of investors believe this morning now that the long-planned division is official.

The new Madison Square Garden Co., trading under the symbol “MSG,” includes venues (led by Madison Square Garden, Radio City Music Hall, the Beacon Theater, The Forum, and The Chicago Theater) and sports teams (New York’s Knicks, Rangers, and Liberty, as well as the AHL pro hockey team Hartford Wolf Pack).

Image (1) MSG-logo111104130824.jpg for post 568439And MSG Networks, trading as “MSGN,” has regional sports and entertainment networks MSG Network and MSG+.

MSGN’s shares — which had been valued at $20 — fell 8.1% to $18.38, shortly after opening this morning. But MSG rose 2.3% to $154.51. Both entities are controlled by the Dolans, who run Cablevision — which they’re preparing to sell to Netherlands-based Altice: MSG was part of the Long Island-based cable company until it was spun off in 2010.

The smart money now is betting that it’s just a matter of time before someone picks up MSG Networks.

BTIG’s Brandon Ross says the Dolans probably want to sell “to increase their war chest of cash to eventually buy-in new MSG.”

The question is: Who might buy?

As a stand-alone network owner that no longer also owns teams MSGN is “particularly vulnerable” to cable and satellite companies that want to cut their programming costs, Stifel’s Benjamin Mogil says. SportsNet New York is an obvious potential partner although “such a merger would be defensive,” he adds. But Fox probably would not be interested: It already owns the New York Yankees’ market-dominating YES Network.

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