MSG Spinoff Floated

Madison Square Garden and Radio City Music Hall owner Cablevision Systems sparked speculation – which was quickly denied – that the arena and theatre, as well as the Beacon Theatre and New York’s Knicks and Rangers, might be sold.

The media conglomerate revealed in the last line of an earnings report in early May that it would “explore the spinoff” of its MSG business but May 11 issued a statement saying it wanted to “make clear” it wasn’t considering the sale of MSG or its related assets.

It’s thought that even a spinoff to shareholders could have a significant influence on development plans for Madison Square Garden and its surrounding neighborhood, according to the New York Times.

Cablevision execs declined to provide more information about their plans for the MSG group in a conference call.

“The operative word here is explore,” Cablevision executive VP Gregg Seibert, said, according to the Times. “We’re going to look at all the considerations associated with a potential spin, but at this point we really can’t comment.”

A company can be spun off without being sold, though they often are. Sometimes the parent retains stakes in the spinoff, or even keeps the spinoff and sells the remaining businesses.

And sometimes companies simply run the idea of a spinoff up the flagpole just to gauge a division’s market value. Considering that Cablevision’s core business is not sports teams and venues, and it’s getting pressure from competitors Verizon and Time Warner Cable, sale speculations are probably inevitable.

The cable division represents 70 percent of Cablevision’s revenue, according to the Times, and it’s believed it would be easier to sell if MSG and three TV networks were spun off. But Cablevision could also sell itself to TWC or Comcast.

And some analysts reportedly believe the Dolan family, which controls 70 percent of Cablevision’s voting rights, could spin off MSG, sell the cable business and focus on the sports and entertainment business.

“Cablevision watchers (and we’d put ourselves in that category) have long pondered possible endgames, and the notion that the Dolans would retain ownership of MSG and the New York sports teams long after the rest of the assets had been divested has always been viewed as among the most likely outcomes,” Bernstein Research analyst Craig Moffett reportedly wrote in a note to investors.

In a tight credit market, it might be difficult for anyone to pony up the financing to make deals in any of the various scenarios.

Moffett values the MSG division, which generates about 14 percent of Cablevision’s revenue, at $2.9 billion, including the potential for development above and around Madison Square Garden.

Cablevision has already begun work to revamp Madison Square Garden and expects it to be completed in time for 2012-13 basketball and hockey seasons. It also expects the cost of the project to be higher than the $500 million previously estimated.