Investors shy away from James Dolan’s decision to merge MSG owner with his cable network

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Investors shy away from James Dolan's decision to merge MSG owner with his cable network


Billionaire James Dolan is merging 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 racing for releases.

Madison Square Garden Entertainment – which in addition to the Garden owns Radio City Music Hall and the Tao restaurant and nightclub chain – announced on Friday that it would buy MSG Networks for around $ 900 million in inventory.

Shares of the companies – both of which are controlled by Dolan, who also owns the Knicks and New York Rangers – were in the news, with MSGE closing 9.9% to $ 84.67 and MSGN dropping 7. , 6% to $ 16.06.

This comes on top of steep drops since news of the deal was first reported on March 10. While MSGE’s take-out offer was a 4% premium over MSG Network shares that day, investors on Friday regretted that their combined market values ​​had already fallen by around $ 750 million.

Wall Street is afraid of the rapprochement in part because MSG Entertainment, after losing more than $ 250 million in the pandemic, appears to be moving forward with a controversial plan to build its expensive, ball-shaped Sphere arenas across the globe. country. To some, Friday’s deal looks 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,” an angry shareholder told The Post, adding that on a conference call Friday, the executives “haven’t addressed what the two companies could do better together than what they can do separately. ”

In a written statement, MSG Entertainment said the new company would be in a better position to hang on to the expansion of legalized sports gambling. MSG Networks owns two regional sports and entertainment channels as well as a streaming service in the New York area.

Madison Square Garden Entertainment - which in addition to the Garden owns Radio City Music Hall and the Tao restaurant and nightclub chain - announced on Friday that it would buy MSG Networks for around $ 900 million in inventory.
The merger also disappointed some MSGE shareholders as it changed the rationale for purchasing the share.
Getty Images

The new company would also benefit from tax efficiency and “would have improved its financial flexibility to fund current growth initiatives, including its planned state-of-the-art site in Las Vegas,” [the] MSG Sphere at The Venetian, ”MSG Entertainment said.

Dolan was not on call Friday, and company executives declined to answer several questions about MSGE development plans. This included the question of whether the merger would speed up the timetable for the opening of the London Sphere. MSG’s Las Vegas Sphere is slated to open in 2023, the company said.

The merger also disappointed some MSGE shareholders as it changed the rationale for purchasing the share.

“The thesis on MSGE is that this is live entertainment – a reopening of the economic play,” growled the angry shareholder. “Buying a cable network dilutes this story.”

In 2015, Madison Square Garden separated its sports and entertainment business from its media business, making MSG Networks a stand-alone media company. Last year, Madison Square Garden separated its MSG Entertainment from Madison Square Garden Sports, which owns the Knicks and Rangers.

MSG Entertainment officials declined to comment further on Friday.

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