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MSG Entertainment’s Updates Spin-Off Plan to Create a Pure-Play Music Company

todayDecember 6, 2022

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MSG Sphere, the long-awaited, globe-shaped venue under construction in Las Vegas, has been promised to revolutionize the concert-going experience. Before it even opens, however, MSG Sphere is transforming the corporate structure of its creator.

On Monday, MSG Entertainment announced new plans for an upcoming spin-off that will separate MSG Sphere, the next-generation music venue being built in Las Vegas, from the rest of its live music business.

The latest version of the proposed transaction results is a pure-play music company under the corporate name MSG Entertainment that includes venues such as Madison Madison Square Garden, Hulu Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre and The Chicago Theatre. MSG Entertainment would also include the entertainment and sports booking business, the Radio City Rockettes and the Christmas Spectacular production, and long-term arena license agreements with New York Knicks and New York Rangers, which play their home games at Madison Square Garden.

The first iteration of the spin-off paired the live music business with MSG Networks, a regional sports network that carries live games of the Knicks, Rangers, New York Giants, New Jersey Devils, New York Islanders and Buffalo Sabres. That would have put the company’s two most mature divisions under one roof, separate from MSG Sphere and Tao Group Hospitality, the operator of restaurant and nightlife properties. MSG Entertainment would, however, combine the financially risky Sphere project with the more stable revenues of MSG Networks, which generated $608.2 million of revenue and $131 million of operating profit in the year ended June 30, 2022. The new plan “is optimal for maximizing shareholder value, while providing both companies with enhanced strategic and financial flexibility to drive long-term growth,” the company said in a statement.

The new spin-off plan puts MSG Networks with MSG Sphere and Tao Group Hospitality. The spin-off company will take the name MSG Sphere Corp and “would have enhanced flexibility to execute its business strategy and pursue global growth opportunities,” executive chairman and CEO James L. Dolan said in a statement.

The proposed transaction would be structured as a tax-free spin-off to all MSGE shareholders. Owners of MSGE Class A and Class B shares would receive a pro-rata distribution expected to amount to about a two-thirds economic interest in MSG Entertainment, the live entertainment company. The parent company, MSG Sphere, would retain approximately a one-third interest in MSG Entertainment.

The $1.8 billion MSG Sphere at The Venetian is slated to open in 2023 with a U2 residency. The spherical venue will provide a multi-sensory experience of audio and visuals for 20,000 standing spectators or 17,500 seated guests. It includes 160,000 square feet of video viewing space and an exterior exosphere with programmable LED technology.

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todayDecember 6, 2022

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