When Nassef Sawiris disclosed last week that he is the largest individual shareholder not named Dolan to own a part of the New York Knicks and Rangers, it raised a curious question: Why is an activist investor and Egyptian fertilizer billionaire taking equity in a company tightly controlled by Long Island’s Dolan family?
Sawiris disclosed in a mandatory regulatory filing that he owns 6.3 percent of MSG Sports, the holding company of the NBA and NHL franchises that trades under the MSGS ticker. His investment office, NNS Holdings, controls 982,098 shares today and will get another 247,386 in March through an agreement with an undisclosed counterparty, according to the filing.
The transaction is unusual because on the rare occasions Sawiris takes large positions in publicly traded companies, he’s agitating for change. It’s been five years since Sawiris had a stake in a U.S. company, according to Securities and Exchange Commission records. At that time, he got one investment, Martin Marietta Materials, to buy his other, Texas Instruments—a company he long called for to be sold. The transaction probably doubled his money. In 2015, he partnered with an activist fund to buy up shares in Germany’s Adidas, getting him in the door to address its board in fluent German and advocate for improvements. Shares have quintupled since. An Irish brewer, a Swiss cement maker and a Spanish engineering firm are other companies in which he’s taken activist stakes in recent years.
“In MSGS, he won’t be able to do that,” Jim Osman, founder and CEO of consulting group The Edge, a securities research firm specializing in special situation stocks, said in a phone interview. “Why? Because the dominant voting position of the Dolans is around 70%. The Dolans don’t really get pushed around.”
MSG Sports, while publicly traded, has a supervoting class of shares owned solely by the Dolans, who used their cable TV business to acquire the sports teams in the 1990s with scion James Dolan taking the sports leadership reigns at the turn of the century. “Jimmy Dolan has a personal veto over any sale,” said Gabelli Research analyst John Tinker in a phone call. “Never say never, but Jimmy Dolan selling the team is something most people are predicting isn’t going to happen in the near future.”
Sawiris isn’t teaming with MSG Sports—he acquired his position in the open market and hasn’t been in discussions with the Dolans, according to one person familiar with the matter who asked not to be named because they weren’t authorized to speak publicly. Representatives for Sawiris didn’t respond to requests for comment. MSG Sports said it doesn’t comment on shareholders.
So if there’s no hope for long-suffering Knicks fans to see the owner they love to hate ousted, what’s going on?
“It might be a play on the actual value of the teams,” said Osman. “You’re buying the sports teams at a discount if you’re buying MSGS—conservatively, around an 17% discount. I think he’s just taking advantage of the current discount valuation.” Osman, like other MSG Sports investors, see the underlying value of the Knicks and Rangers as exceeding their stock-market value. The stock market today says the current enterprise value—value of the stock, plus debt—is $5.35 billion. Osman’s firm pegs the two iconic franchises, plus an esports arm, as worth almost $6.3 billion and as much as $7 billion.
Sawiris already has experience in sports-value investments. He splits control of the entity that owns the majority of Aston Villa, the English Premier League squad, with Wes Edens, owner of the Milwaukee Bucks. The pair bought 55% of the “Villains” in 2018 for $39 million. As recently as 2016, consulting firm Deloitte considered Aston Villa one of the top 25 most valuable soccer teams globally. It’s likely Sawiris, who attended the University of Chicago and owns one of Manhattan’s most expensive co-ops, sees a similar value play with the Knicks and Rangers.
“I’d say it’s a smart move, it’s timely,” said Gabelli’s Tinker. “In terms of who’s been helped by COVID and who’s been hurt, sports has obviously been hurt, so the stock is not as rich as it was, so to speak. Two: The teams can’t get any worse, so it’s not like he’s buying at the top.” The Knicks haven’t finished higher than ninth in their division since 2014, while the Rangers have missed the NHL’s postseason tournament two of the past three years. MSG Sports shares are down 20% from their 2020 peak.
It’s also likely a reflection of the globalization of sports, Tinker added. It’s not unusual for American billionaires to go abroad to buy stakes in teams. While the Seattle Mariners and Brooklyn Nets have been notable exceptions, North American sports hasn’t had many foreign owners. But there’s no reason for the trend of cross-border owners not to be seen here too.
“He’s worth $8 billion. This is a $200 million stake,” added Osman. “It’s not that much for him, and it’s potentially got some huge growth, and I think that’s the bottom line.”