MSG makes ‘significant progress’ on business spin-offs

Article posted by Coliseum, March 20^th, 2020

Image: MSG

The multipurpose indoor arena in New York City – Madison Square Garden (MSG) – revealed the proposed spin-off of its entertainment businesses from its sports businesses, naming the intended leadership team for the new units.

MSG informed that it is continuing to make “important progress” on the spin-off, filing a publicly available Form 10 Registration Statement with the U.S. Securities and Exchange Commission (SEC) for the new entertainment company, which is expected to be called Madison Square Garden Entertainment Corp. (MSG Entertainment).

Apart from this, the company announced that Andrew Lustgarten, who presently holds the post of MSG President, is expected to be named President and head honcho who will run the show as far as all business operations for the pure-play sports company is concerned, which is set to be renamed Madison Square Garden Sports Corp. (MSG Sports).

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Once the spin-off is through, MSG’s Executive Chairman and CEO James Dolan is expected to serve in the capacity of Executive Chairman of the sports company and as Executive Chairman and CEO of the entertainment company. In addition to serving as President and CEO of the sports company, it is anticipated that Lustgarten will serve as President of the entertainment company.

The transaction comes with a lot of riders, including final league and MSG Board approval. MSG Sports aims to become a pureplay sports company that would reflect the “strong and steady financial performance” of MSG’s sports businesses. MSG views MSG Entertainment as an entertainment company that would cash in on opportunities for growth, most notably through venue expansion.

In December, MSG filed a registration statement with the SEC for the spin-off. In November, the board approved a revised plan for the proposed separation, while it was revealed that the planned MSG Sphere arena in London is expected to open later than what was initially planned.

The sports and entertainment giant, which owns the eponymous Madison Square Garden arena in Manhattan, is planning new venues in Las Vegas and London. MSG said in November last year that “significant” progress had been made on the Las Vegas project, which it hopes to open in 2021, but the London arena – set to be located near the Olympic Park in Stratford – continues to move through the planning application process.

Earlier, MSG was exploring ways and means to spin off around two-thirds of its economic interest in its sports businesses to shareholders, with the entertainment company to retain an approximate one-third interest in the sports company. Under the revised plan the details of which was revealed in November last year, the transaction would be structured as a tax-free pro rata spin-off to all MSG shareholders, through which each shareholder would continue to own their current economic interest in both the sports and entertainment businesses.

MSG owns the New York Knicks NBA team and the New York Rangers NHL ice hockey franchise, which both play at the Manhattan arena. MSG also owns The Forum, a multi-purpose arena in Inglewood, California. It was reported recently that Steve Ballmer, owner of the Los Angeles Clippers NBA franchise, is in talks to purchase The Forum, which is located near to the place where the team plans on building a new arena.

Said Dolan, “We look forward to the pending separation of our sports and entertainment businesses, which will better enable the two companies to pursue their own unique strategies, while providing our shareholders with the ability to more clearly assess the value of each company.”

“Over the last six years, Andy has helped guide MSG through an unprecedented period of change. I am confident that his considerable experience in developing strategic relationships and new opportunities will quickly help position the new sports company as one of the world’s leading sports organizations.”

The transaction comes with a lot of provisos, including final league and nod from the MSG Board.

In his role at MSG Sports, Lustgarten will chalk out the company’s business strategy and run all aspects of business operations for its premier collection of marquee professional sports franchises – the New York Knicks, New York Rangers, Westchester Knicks, Hartford Wolf Pack, Counter Logic Gaming and Knicks Gaming. Team operations for the Knicks and Rangers will continue to be under the purview of Dolan.

Asserted Lustgarten, “MSG Sports will be made up of some of the most celebrated and iconic brands in all of sports, and I look forward to working with the entire organization to ensure we continue to deliver excellence across our operations. As a standalone entity, the sports company will be well-positioned to maintain its strong and steady financial performance, driven by our Knicks and Rangers franchises, and to deliver exceptional value for our shareholders.”

Lustgarten currently serves as the President of MSG. During his tenure with the company, he has been in charge of the company’s celebrated assets and been responsible for diversifying MSG’s portfolio of offerings and partnerships, including the acquisition of Boston Calling Events and Tao Group Hospitality; the company’s partnership with the fantasy sports giant, Draft Kings, and its expansion into the world of esports with the acquisition of Counter Logic Gaming.

Earlier, Lustgarten spent seven years at the National Basketball Association (NBA), where he served as Senior Vice-President, Global Strategy, and prior to that, Special Assistant to the Commissioner.

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