Asset Gain: Cablevision To Spin Off MSG

by David Goetzl, Nov 17, 2009, 3:54 PM

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A top Cablevision executive said Tuesday the company expects to complete the spinoff of its Madison Square Garden unit by Dec. 31. Cablevision vice chairman Hank Ratner will serve as CEO of the new entity, with Jim Dolan as executive chairman.

Speaking to investors at a Citi event, Cablevision Executive Vice President Gregg Siebert said the company has received clearance from the IRS for a tax-free spinoff of MSG -- which would create a separate publicly traded entity that includes regional sports networks, entertainment venues and sports teams.

Siebert said Cablevision continues to seek other government approvals, but remains "hopeful" about the end-of-year timetable. Closing by the end of 2009 would make things "cleaner" from a human resources and transitional perspective, he added.

Dolan will continue to serve as CEO of Cablevision, along with his executive chairman role at MSG. Ratner is familiar with MSG's operations, having served as vice chairman there, along with his corporate role at Cablevision.

Separately, Siebert said turning part of Newsday's Web site into a pay service will not move the profit needle, but provides a measure of future-proofing. The Cablevision-owned Long Island, N.Y.-based paper has begun charging $5 a week for access to much of its content, although people who receive the paper at home and those who subscribe to Cablevision's high-speed Internet service get free access.

"I don't think that change of walling it off is going to materially increase subscription dollars in the near term -- because we have so many subscribers that get the paper from home delivery or are already (Cablevision broadband) subscribers," Siebert said. "We're taking as many steps as we can to protect our intellectual property and try and assure that as the newspaper business recovers, or at minimum stabilizes, that Newsday is part of that recovery."

Revenues for the MSG unit were $650 million through the first nine months of 2009, a .8% increase versus last year. Operating income was $3 million -- a reversal from a loss a year ago. MSG accounted for 12% of Cablevision revenue through the first three quarters of this year.

Siebert, a former top Merrill Lynch executive, said MSG is "an asset that is basically lost within Cablevision," which prompted the spin. "We did not really see the same type of value in our stock price from Madison Square Garden that we will see once Madison Square Garden is a separately publicly traded company," he said.

MSG is undertaking a renovation of the Madison Square Garden facility that will cost well above the $500 million initially projected. That has led to investor concern it could hinder the new business' share price.

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