Money

MSG Entertainment Considers Spin-off of Live Entertainment Business and MSG Network Business


Deal overview

August 18, 2022, Madison Square Garden
MSG
Entertainment Corp (NYSE: MSGE, $60.61, market capitalization: $2.1 billion) has announced that its board of directors has informed management that it could spin off its live entertainment and MSG Network businesses as independent public companies. announced that it has approved to consider sex. The proposed spin-off will be structured as a tax-free transaction for all his MSG shareholders.
Upon completion of the planned split, the record holders of MSGE Class A and Class B common stock will receive a pro rata share expected to represent approximately two-thirds of the live entertainment and media company’s economic profits. The remaining common stock, expected to represent approximately one-third of the live entertainment and media company’s economic interests, will be held by MSG Entertainment (RemainCo). Retained shares may be 1) used in a tax-exempt exchange offer for common stock of MSG Entertainment, 2) to raise capital for general corporate purposes, and/or 3) used in subsequent projects. available. rata spin-off to MSGE shareholders. The Company has not set a timetable for the completion of this spin-off transaction. Completion of the transaction is subject to a variety of conditions, including specific league approvals, a personal written award from the IRS, receipt of tax opinions from legal counsel, and final approval of the MSG Board of Directors.

After the planned spin-off, MSGE Entertainment (RemainCo) will include majority stakes in MSG Sphere and Tao Group Hospitality. The first of his MSG Spheres is currently under construction in Las Vegas and is expected to open in late 2023. This includes about a third of the live entertainment and media company’s financial profits and most of the company’s cash on hand. The live entertainment and media company (spin-off) includes venues as diverse as Madison Square Garden, Hulu Theater at Madison Square Garden, Radio City Music Hall, The Beacon Theatre, Chicago Theatre, and its own entertainment. Also sports booking business and long-term arena license agreements with New York Knicks and New York Rangers. Also included are Radio City Rockettes, Christmas Spectacular productions and MSG Networks. MSG Networks owns two regional sports and entertainment networks, MSG Network and MSG+, and a companion streaming app, MSG GO.

Basis of transaction

MSG Entertainment is a global leader in live entertainment and owns a unique collection of world-class entertainment assets that are currently undervalued by investors. The proposed spin-off is therefore aimed at bridging this valuation mismatch and creating shareholder value for his MSGE shareholders in the long term. The market welcomed the announcement, and the stock price rose about 3.5% in one day after the announcement (8/19). It’s worth noting that MSG Entertainment was a tax-exempt spin-off from the Madison Square Garden Company on April 17, 2020.

The proposed split into two companies would allow shareholders to assess each company’s assets and future potential. Similarly, both companies can independently pursue their own business strategies and capital allocation policies. MSG Entertainment has expanded its portfolio of assets to include cutting-edge music and entertainment focused venues MSG Sphere and Tao Hospitality Group, two businesses with global brands and significant long-term growth opportunities. . The first of his MSG Spheres is currently under construction in Las Vegas and is expected to open in late 2023. In addition, MSG Entertainment retains approximately one-third of the financial interests and opportunities of live entertainment and media companies. To raise funds in the future.

Live entertainment and media companies with valuable asset portfolios such as Madison Square Garden, Christmas Spectacular Productions and MSG Networks are expected to generate substantial free cash flow and benefit from the attractive growth profile of their live entertainment business It has been.

Q4 2022 and 2022 Results Review

MSGE revenues increased 74% year-over-year to $453.5 million in the fourth quarter of 2022, compared with $260.6 million in the fourth quarter of 2021. This was due to higher revenues from the Entertainment and Tao Hospitality segments, partially offset by lower revenues from the MSG Networks segment. Adjusted operating income for the fourth quarter of 2022 was $0.7 million, compared to adjusted operating income of $2.5 million for the year-ago quarter. MSGE sales increased 112% year-over-year to $1.7 billion in FY22 compared to $814.2 million in FY21. This was due to a recovery in consumer demand for the company’s product portfolio. Adjusted operating profit for FY22 was $133.6 million, while adjusted operating profit for FY21 was $40.2 million. As of June 30, 2022, MSGE had approximately $829 million in cash on hand and total outstanding debt of approximately $1.76 billion.

Company Profile

Madison Square Garden Entertainment Corp (parent company)

Madison Square Garden Entertainment Corporation (MSGE) is a provider of live entertainment consisting of venues, marquee entertainment brands, regional sports and entertainment networks, dining and nightlife offerings, and music festivals. The Company was spun off from the Madison Square Garden Company on April 17, 2020. Our segments include Entertainment, MSG Networks and Tao Group Hospitality. The Entertainment segment consists of a portfolio of venues such as Madison Square Garden, Hulu Theater at Madison Square Garden, Radio City Music Hall, Beacon Theater and Chicago Theater. The MSG Networks segment consists of the Company’s regional sports and entertainment networks, MSG Network and MSG+, companion streaming applications, MSG GO, and other digital properties. The Tao Group Hospitality segment features a controlling interest in Tao Group Hospitality, a hospitality group with entertainment, dining and nightlife brands such as Tao, Marquee, Lavo, Beauty & Essex, Cathedrale, Hakkasan and Omnia. It operates approximately 70 entertainment dining establishments. The company reported revenue of $1.7 billion for the year ended June 30, 2022.

After the planned spin-off, MSGE Entertainment (RemainCo) will include majority stakes in MSG Sphere and Tao Group Hospitality. It also holds approximately one-third of the financial interest of the live entertainment and media company (spin-off) and most of our cash on hand.

Live entertainment and media company (spin-off)

The live entertainment and media company (spin-off) includes venues as diverse as Madison Square Garden, Hulu Theater at Madison Square Garden, Radio City Music Hall, The Beacon Theatre, Chicago Theatre, and its own entertainment. Also sports booking business and long-term arena license agreements with New York Knicks and New York Rangers. Also included are Radio City Rockettes, Christmas Spectacular productions and MSG Networks. MSG Networks owns two regional sports and entertainment networks, MSG Network and MSG+, and a companion streaming app, MSG GO.


https://www.forbes.com/sites/joecornell/2022/08/25/msg-entertainment-to-explore-spin-off-of-its-live-entertainment–msg-network-businesses/

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