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MSG Entertainment mulls new spin-off plan

Madison Square Garden (MSG) Entertainment is exploring a potential spin-off that would create a separately-traded public company comprised of its traditional live entertainment business.

The board of director’s has authorised management to look into the proposed spin-off, which would separate those businesses from the firm’s MSG Sphere and Tao Group Hospitality businesses.

The group says the move would provide shareholders with “greater investment choice and visibility into each company’s businesses and growth prospects, while enabling both companies to pursue distinct business and capital allocation strategies”.

“This potential transaction would create two companies, each with a distinct value proposition for investors”

“This potential transaction would create two companies, each with a distinct value proposition for investors,” says executive chairman and CEO James Dolan. “The live entertainment and media company would include Madison Square Garden, the Christmas Spectacular production and MSG Networks and would generate substantial free cash flow.

“The second company, comprised of MSG Sphere and Tao Group Hospitality, would be focused on unique shared experiences, innovation and global opportunities for growth.”

Alongside New York City’s 20,000-cap Madison Square Garden, the live entertainment and media firm is expected to include The Hulu Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre and The Chicago Theatre, along with the firm’s entertainment and sports bookings business and long-term arena licence agreements with the New York Knicks and New York Rangers.

MSG Entertainment would then comprise the MSG Sphere venues, a majority interest in TAO Group Hospitality, an approximately one-third economic interest in the live entertainment and media company; and the majority of the company’s cash on hand.

If the company proceeds with the separation, it would be structured as a tax-free spin-off to all MSGE shareholders.

MSG previously completed the spin-off of its entertainment businesses from its sports company in 2020.

“The past year demonstrated the resiliency of our business and the robust demand for our portfolio of live experiences”

Meanwhile, the company has also reported its latest financial results. For fiscal 2022, MSG Entertainment reported revenues of US$1.7 billion as compared to revenues of $814.2 million in the prior year. In addition, the firm had an operating loss of $102.7 m and adjusted operating income of $133.6m in fiscal 2022, compared to an operating loss of $188.2m and adjusted operating income of $40.2m in the prior year.

For the fiscal 2022 fourth quarter, it reported revenues of $453.5m as compared to $260.6m in revenues in the prior year quarter. The company posted an operating loss of $56.8m and adjusted operating income of $700,000 in the fiscal 2022 Q4, compared to an operating loss of $44m and adjusted operating income of $2.5m in the prior year quarter.

“The past year demonstrated the resiliency of our business and the robust demand for our portfolio of live experiences,” adds Dolan. “We continue to make significant progress on the construction of MSG Sphere in Las Vegas, which remains on track to open in the second half of calendar 2023.”

 


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