MSG Pays $181M For Controlling Stake In Nightlife Company Tao Group

Former Cablevision chief James Dolan loves nightlife — at least well enough to make a big investment in it.

His family-controlled Madison Square Garden Company says this morning it paid $181 million for a 62.5% stake in a new company called Tao Group. It specializes in what the companies call “entertainment and nightlife venues” with 19 in New York, Las Vegas, and Sydney Australia including Tao, Marquee, Lavo, Avenue, The Stanton Social, Beauty & Essex and Vandal.

The Dolan family controls about 70% of the voting shares at MSG, which owns venues including Madison Square Garden, The Beacon Theater, and Radio City Music Hall plus basketball’s New York Knicks and hockey’s New York Rangers. In 2015 it separated from its regional sports networks, now housed in another publicly traded company MSG Networks.

“Tao Group is a unique and attractive business that furthers our focus on the ‘live experience’ while also exposing us to new areas of growth,” says Dolan, who’s MSG’s executive chairman. “We now have a tremendous opportunity to utilize that expertise across our live offerings, while leveraging each other’s strengths to drive value and growth for both businesses.”

Tao Group last year generated $235 million in revenue, and $43 million in adjusted operating income, the company says.

Its founders — Marc Packer, Rich Wolf, Noah Tepperberg and Jason Strauss – kept a 37.5% stake in the company and will continue to run day-to-day operations.

Wolf says that MSG’s investment will help to “build a global hospitality platform.”

The companies say that they will “work together to create new and innovative premium hospitality experiences that can be integrated across MSG’s portfolio of live offerings.”

The new deal gives MSG opportunities to to buy additional stock “including during periods when the Company might otherwise be prevented from making open market purchases,” they say.

As part of the agreement, parent company Tao Holdings must pay MSG a $5 million annual management fee and buy at least $1 million of “MSG inventory or services,” increasing 5% annually, the companies say in an SEC filing.

MSG shares are up more than 14% over the last 12 months, and were bumped up this week when Morgan Stanley’s Ryan Fiftal upgraded his recommendation to “overweight.” He notes that the Dolan family might want to take MSG private in October, when a two-year tax cleansing period expires.

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