Madison Square Garden Acquires MSG Networks In All-Stock Deal

Madison Square Garden Entertainment Corp. MSGE is acquiring MSG Networks Inc. MSGN in an all-stock, fixed exchange ratio transaction.

What To Know: MSG Networks was the first regional sports network in North America, going on the air in October 1969 with a National Hockey League game between the New York Rangers and Minnesota North Stars. Over the years, the network changed names and ownership.

Today, the company’s broadcast entities, MSG Network and MSG+, operate in the New York City metropolitan area and deliver live local games of the New York Knicks, New York Rangers, New York Islanders, New Jersey Devils and Buffalo Sabres, as well as coverage of the New York Giants and Buffalo Bills.

According to a statement released by the companies, the merger is expected to be tax-free for both entities and their stockholders, with MSG Networks stockholders receiving 0.172 shares of MSG Entertainment Class A or Class B common stock for each share of MSG Networks Class A or Class B common stock they own.

The exchange ratio is approximately 4% above the ratio of the unaffected closing stock prices of the two companies as of March 10, which was the last trading day before the release of a new press report speculating that a merger was possible.

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Why It Matters: MSG Entertainment ended 2020 with a federal net operating loss of approximately $250 million, which it primarily attributed to the temporary closure of its venues during the COVID-19 pandemic. MSG Networks generated revenue of $685.8 million during its fiscal year 2020.

The companies’ statement stated the merged entity will have “a stronger liquidity position to support its live entertainment business, which following the shutdown of its venues due to the pandemic, is now on a path back to normal operations.” This includes an increased financial strength for projects including MSG Sphere, a new venue planned for a 2023 opening in Las Vegas.

“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 MSG Entertainment President Andrew 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.”

Price Action: MSG Entertainment traded around up about 5% to $98.75 Friday morning, while MSG Networks was down 5% at $16.51.

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