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 run to the exits.
Madison Square Garden Entertainment – which in addition to Garden owns Radio City Music Hall and the restaurant and nightclub chain Tao – announced Friday that it will purchase MSG Networks for approximately $ 900 million in stock.
Shares of the companies – both controlled by Dolan, who also owns the Knicks and the New York Rangers – hit the news, with MSGE closing at $ 84.67 and MSGN at 7.6 percent to $ 16.06.
That’s on top of the steep declines since the deal’s message was first reported on March 10. While MSGE’s takeout offer represents a 4 percent premium on MSG Network’s stock on that day, investors were growling on Friday that their combined market values have already fallen roughly. $ 750 million.
Wall Street fears it crashing, in part because, after losing more than $ 250 million in the pandemic, MSG Entertainment appears to be developing a controversial plan to build its expensive, spherical Sphere arenas across the country. To some, Friday’s deal seems like a signal that MSG Entertainment needs MSG Networks as a source of money.
“The question for shareholders is whether this is an indicator that there are funding issues at MSGE,” a muttered shareholder told The Post, adding that during a conference call on Friday, executives “did not indicate what the two companies could do better together. can do it separately. “
In a written statement, MSG Entertainment said the new company would be better positioned to stick with the expansion of legalized sports gambling. MSG Networks owns two regional sports and entertainment channels and a streaming service in the New York area.
The new company would also benefit from tax breaks and “would have increased financial flexibility to fund current growth initiatives, including the planned state-of-the-art Las Vegas location, [the] MSG Sphere at the Venetian, ”said MSG Entertainment.
Dolan was not on Friday’s call, and business leaders declined to answer several questions about MSGE development projects. That included whether the merger would speed up the timing of the London Sphere’s opening. MSG’s Las Vegas Sphere is scheduled to open in 2023, the company said.
The merger also disappointed some MSGE shareholders as it changed the rationale for buying the stock.
“The statement about MSGE is that this is live entertainment – a reopening of the economic game,” the hurt shareholder argued. “Buying a cable network dilutes that story.”
In 2015, Madison Square Garden spun off its sports and entertainment activities from its media company, making MSG Networks a media company in its own right. Last year, Madison Square Garden spun off its MSG Entertainment from Madison Square Garden Sports, which owns the Knicks and the Rangers.
Officials at MSG Entertainment declined to comment further on Friday.