Media and entertainment company, Cablevision Systems Corp. (NYSE:CVC), is preparing to spin off its Madison Square Garden [M.S.G.] assets, Bloomberg News reported late Wednesday, citing a person familiar with the matter.
Those assets include the New York Knicks basketball team, the Radio City Music Hall, the Madison Square Garden arena, the Rangers hockey team, and two New York- area sports networks. Stockholders, notes Bloomberg, would receive one share of the new company, to be called ‘Madison Square Garden’, for every share of Cablevision they own.
“It’s an extremely smart decision,” said Rich Greenfield, an analyst at Pali Capital LLC, referring to a possible spinoff. “It will not only highlight the strong free cash flow of Cablevision’s core cable business, but it certainly makes an acquisition of the company easier in the long term, as it will remove the hardest asset [the M.S.G. division] to value within the company.”[Bloomberg]
Greenfield is right in his analysis. The M.S.G. division of Cablevision has been hard to value for some time. Sport teams rarely get sold and are certainly not the most interchangeable of commodities. Some analysts however, have valued the entire M.S.G. division, which has a significant $500 to $700million debt bill due in the next four years for its renovation of the M.S.G. complex in New York, at anywhere from mid $700 million to $1.5 billion.
Earlier this month, New-York-based Greenfield said that splitting off Madison Square Garden will let Cablevision focus on its more profitable cable-television business and may attract potential buyers for the company, such as Time Warner Cable Inc. (NYSE:TWC) or Comcast Corp. (NASDAQ:CMCSA).
Cablevision, which bought M.S.G. from Viacom Inc. (NYSE:VIA.B) for $1.08 billion in 1994, is scheduled to report 2Q earnings tomorrow (7/30).