MSG Sphere Developer to Acquire Sister Company’s Sports Networks

Posted on: March 29, 2021, 11:21h. 

Last updated on: March 29, 2021, 11:45h.

The company building the MSG Sphere at The Venetian in Las Vegas is acquiring its sister organization. 

MSG Sphere MSG Entertainment MSG Networks
Construction continues on the MSG Sphere at The Venetian in Las Vegas. The developer of the entertainment venue, MSG Entertainment, is buying sister company MSG Networks. (Image: Las Vegas Review-Journal)

The Madison Square Garden Entertainment Corp. (MSG Entertainment) was formed last year through several corporate reshufflings by the Dolan family’s sports and entertainment media empire. The Madison Square Garden Co. rebranded in 2020 as Madison Square Garden Sports Corp., and spun off its non-sports assets into MSG Entertainment and MSG Networks. 

MSG Entertainment’s holdings include New York’s Hulu Theater at Madison Square Garden, Radio City Music Hall, and the Beacon Theatre. MSG Entertainment’s portfolio is expanding with the $1.66 billion Sphere in Las Vegas, an immersive experience billed to cater to all five human senses. The 17,000-seat venue is set to open in 2023. 

MSG Entertainment is now acquiring MSG Networks. The sports media company owns and operates two regional sports networks in the New York City area, plus a companion streaming service. The all-stock acquisition is for roughly $900 million. MSG Networks shareholders will receive 0.172 shares of MSG Entertainment upon competition of the merger, which is expected to occur in the third quarter of this year.

There was no word on whether the combined unit will undergo a name change. 

Tapping Into Sports Market

MSG Entertainment President Andrew Lustgarten said in a release that adding MSG Networks to the company enhances its financial flexibility and better diversifies the organization. He cited the expanding sports betting market, now legal and operational in 20 states, plus DC, as another reason for targeting MSG Networks for a takeover.

The MSG Network — MSG Networks’ flagship regional cable and radio network — broadcasts in New York, north and central New Jersey, southern Connecticut, and northern Pennsylvania. New Jersey has emerged as the sports betting market leader in terms of betting revenue.

New York currently only allows in-person sports betting at upstate casinos. But discussions in Albany are mulling online sports betting.

“MSG Entertainment is actively executing a plan designed to grow the company beyond its established collection of assets into one that is pioneering the next generation of entertainment,” said Lustgarten. “We have always believed in the value of live sports and look forward to welcoming MSG Networks back into the fold as part of a transaction that we are confident would enhance our financial flexibility and set the stage for continued growth and value creation.”

Investors Wary

Traded on the New York Stock Exchange, MSG Entertainment’s news of its purchasing MSG Networks wasn’t well received on Wall Street. 

MSGE shares tumbled on Friday following the announcement, the stock dropping nearly nine percent from $93.00 to $84.66. Shares are down another two percent today.  

“While the deal provides access to much-needed cash flow, and has modest tax benefits and cost synergies, we believe other funding alternatives could have been pursued,” opined Oppenheimer analyst Ian Zaffino.