Billionaire James Dolan merges the company that owns the Madison Square Garden arena with the cable network that broadcasts New York Knicks games to local fans – and investors are running for exits.
Madison Square Garden Entertainment – which in addition to Garden owns Radio City Music Hall and the Tao chain of restaurants and nightclubs – announced on Friday that it will buy MSG Networks for about $ 900 million in stock.
The shares of the companies – both controlled by Dolan, which also owns Knicks and New York Rangers – went on the news, with MSGE closing 9.9% at $ 84.67 and MSGN dropping 7.6% to 16.06 USD.
This is in addition to the sharp declines since the March 10 transaction was first reported. While MSGE’s takeover bid represents a 4% premium to MSG Network shares that day, investors on Friday estimated that their combined market values had already fallen by about $ 750 million.
Wall Street fears ties in part because MSG Entertainment, after losing more than $ 250 million in a pandemic, appears to be advancing a controversial plan to build its expensive ball-shaped Sphere arenas from all the country. For some, Friday’s deal seems like a signal that MSG Entertainment needs MSG networks as a source of cash.
“The question for shareholders is whether this is an indicator that there are funding challenges at MSGE,” a shareholder told The Post, adding that during a conference call on Friday, directors “did not address what the two companies they could do better together than they can do separately. ”
In a written statement, MSG Entertainment said the new company will be better positioned to expand into legalized sports gambling. MSG Networks owns two regional sports and entertainment channels, as well as a streaming service in the New York area.
The new company would also enjoy fiscal efficiencies and “increase financial flexibility to fund current growth initiatives, including its state-of-the-art Las Vegas headquarters,” [the] MSG Sphere in Venice “, said MSG Entertainment.
Dolan was not on Friday’s call, and company executives declined to answer more questions about MSGE development projects. This included whether the merger would accelerate the opening of the London Sphere. The Las Vegas Sphere company is scheduled to open in 2023, the company said.
The merger also disappointed some MSGE shareholders, as it changes the reason for buying the share.
“The thesis about MSGE is that it is about live entertainment – a reopening of the economic game”, the miffed shareholder acted. “Buying a cable network dilutes that story.”
In 2015, Madison Square Garden separated its sports and entertainment business from its business environment, making MSG Networks an independent media company. Last year, Madison Square Garden gave up MSG Entertainment from Madison Square Garden Sports, which owns Knicks and Rangers.
MSG Entertainment officials declined to comment on Friday.