Your Madison Square Garden Spinoff Cheat Sheet

Gabelli & Company analyst Brett Harriss recently put together a report on the coming Madison Square Garden spinoff. In the report, Harriss provided a cheat sheet that details the operations of the two post-spinoff companies and discussed Gabelli’s take on Madison Square Garden as an investment.

What To Expect

The distribution of Madison Square Garden’s spinoff will take place on September 30, and investors will receive three shares of MSGN and one share of “new” MSG for every three shares of “old" MSG held. The record date for the spinoff was September 21.

Related Link: Madison Square Garden Stock: No Longer A Slam Dunk

Madison Square Garden Company

The company trading under the ticker MSG will be comprised of the sports and entertainment businesses, including the sports teams, the venues, MSG bookings, MSG productions and strategic joint ventures. In addition, the company will be capitalized with $1.45 billion, enough to pursue acquisitions and/or buyback stock.

MSG Networks

The company trading under the ticker MSGN will be comprised of the regional sports networks MSG and MSG+. Immediately following the spinoff, MSGN will be levered by about 5.0x, but it should use its stable cash flow to immediately begin de-levering.

How To Play It

Even though the record date for the spinoff has passed, Gabelli rates both post-spin entities as Buys. “The Madison Square Garden Company (MSG) owns a collection of truly unique assets, (sports franchises, iconic venues and real estate) that benefit from sustainable barriers to entry and the potential long-term asset growth,” Harriss explained.

He added that MSG Networks could be a potential buyout target for companies such as Twenty-First Century Fox Inc FOX and Comcast Corporation CMCSA.

Disclosure: The author holds no position in the stocks mentioned.