New York’s Dolan family found itself $70 million richer Friday when the parent company of the Knicks and Rangers leapt in trading after announcing a quickened share buyback and a large special dividend.
Madison Square Garden Sports (MSGS), the publicly traded owner of the NBA and NHL franchises, as well as two developmental basketball teams and esports franchises, announced that it would quickly buy up $75 million worth of shares in November after it reports quarterly earnings. In a press release, the company said the current share price is below the “intrinsic value of the Company’s sports teams,” making the purchase of MSGS shares “prudent.”
The company doesn’t assert a dollar value for its franchises, but it referred to third-party valuations, including those done by Sportico for the NBA and NHL, as evidence the stock market isn’t fully valuing the franchises. The Knicks are valued at $6.12 billion, making it the richest NBA team, while the Rangers are second in ice hockey at $1.87 billion. Totaling about $8 billion, the value of the parts appear to equal a sum greater than what Wall Street asserts. Even after leaping more than $10 on the news Friday, to about $150 a share, MSGS Sports has a market capitalization of $3.75 billion.
The buyback will occur after MSG Sports announces its first-quarter earnings, tentatively expected on Nov. 9. It is part of a previously authorized share repurchase program but is notable in that the company characterizes the $75 million tranche as “accelerated.”
MSG Sports also announced $7 per share special dividend, which executive chairman Jim Dolan said in the release “demonstrates our ongoing commitment to delivering shareholder value.” The special dividend will cost the company $175 million. The outlays will be funded in part by borrowing on the existing Knicks and Rangers credit lines, according to MSG Sports. The company had $91 million in cash as of June 30, according to data compiled by Reuters.
The moves provided immediate returns for MSG Sports shareholders, of which the Dolans are the largest. The family own more than 4.5 million Class B shares in MSG Sports that come with supervoting privileges but are otherwise treated as common shares. Between the dividend, which is to be paid to shareholders as of Oct. 17, and the bounce in the stock Friday, the family members are about $70 million richer. Other significant shareholders include private equity firm Silver Lake, which has multiple sports interests and owns 1.9 million common MSG shares, and Egyptian billionaire and Aston Villa co-owner Nassif Sawiris, who controls 1.2 million shares.
The Dolans also control a sister company, Madison Square Garden Entertainment (MSGE), which holds ownership of the Manhattan arena and other venues, the MSG regional sports television network, the under-construction MSG Sphere at Las Vegas and restaurant operator Tao Hospitality. MSG Entertainment, also publicly traded, announced last month it is exploring splitting into two, creating one company to hold the sphere and restaurants, and the other the established venues and TV properties.