It looks as if Cablevision Systems Corp. will be spinning off its Madison Square Garden business after all.
The cable company's board of directors has authorized the company's management to move forward with the spin-off of MSG to Cablevision shareholders.
Following the spin-off, stockholders would own shares in both Cablevision and the new MSG, including the New York Knicks and New York Rangers professional sports teams, MSG Network, Madison Square Garden and Radio City Music Hall, among a host of other assets.
The Dolan family would remain firmly in control of both companies. James Dolan would become executive chairman of the new, public Madison Square Garden and would continue in his present role as President and CEO of Cablevision, while Hank Ratner would become president and CEO of Madison Square Garden, and remain Cablevision's vice chairman. Charles Dolan would continue in his role as Cablevision's Chairman.
The transaction, announced on the day Cablevision releases its second-quarter earnings, will be structured as a tax-free pro rata spin-off to the company's existing shareholders and is expected to be completed by year-end, subject to regulatory approval.
Cablevision said it anticipates that the spin-off would come in the form of a pro rata distribution to all shareholders of Cablevision, with holders of Class A common stock receiving Class A shares in Madison Square Garden and holders of Class B common stock receiving Class B shares in Madison Square Garden.
The announcement comes just months after Cablevision, during its first-quarter earnings call on May 7, indicated that the board of directors had authorized management to explore the spin-off of MSG.
With Wall Street and other pundits wagging about the prospects, Cablevision, four days later, then issued a statement that it is "not considering the sale of MSG, any of MSG's businesses or any other Cablevision business at this time."
On July 30, Cablevision reiterated that it was was not considering divesting MSG or any of its assets "at this time."
James Dolan issued this statement that day: "This spin-off will create two distinct companies, each with enhanced strategic flexibility, its own defined business focus and clear investment characteristics. The new MSG will be an attractive combination of sports, entertainment and programming properties, while Cablevision will continue to house a portfolio that includes industry-leading telecommunications services and popular programming networks. We believe that the combined value of these assets has not been fully realized, and that this transaction will be beneficial to shareholders as both Cablevision and MSG freely pursue their own individual business plans."
"As a relatively small portion of Cablevision's consolidated results, we believe it was difficult for investors to fully appreciate the strengths and strategies of MSG," Ratner said on the company's second-quarter earnings conference call with analysts. Ratner added that the transaction will highlight MSG's top three businesses and unlock value for shareholders.
Ratner said the planned renovation for the Madison Square Garden arena will continue and the company is currently working with its construction team to finalize a plan for the renovation. While the cost of the project has yet to be set in stone, Ratner said that the overall cost will be "materially higher" than the $500 million originally projected, however, he said the cost of the project will be funded through MSG's existing liquidity and operating cash flow.
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