Cablevision Value Watch: Madison Square Garden Spin-Off (CVC, MSGNV, MSG, GBL)

Cablevision Systems Corporation (NYSE: CVC) has approved the spin off of Madison Square Garden to Cablevision shareholders.  Madison Square Garden is the home venue of the New York Knicks and Rangers, but is also home to concerts, boxing events, tennis, and other events.  You have to be a holder of Cablevision to receive the shares, at least that is the case before the regular trading takes place.  Cablevision said tonight that the share distribution will take place on February 9, 2010, and that distribution will be made to Cablevision’s shareholders of record as of the close of business on January 25, 2010 (i.e. settlement date on or before).

Terms of the spin-off will be 1 share of the new Madison Square Garden Class A stock for each four shares held of Cablevision Class A shares held as of the record date.  The company is keeping the same Class A and Class B share structure, and the Class B ratio is the same as for Class A.  Class B shares are not exchange-traded, and the control of MSG will remain under the Dolan family control via the Class B shares.

The company noted that fractional shares of MSG common stock will not be distributed to Cablevision stockholders, and those holders who would have received fractional shares will see those shares aggregated and sold in the public market.  After that, the proceeds will be distributed pro rata in cash to the holders who would have otherwise received a fractional share.  The company also noted that this has been designated as a tax-free spin-off and no action is required by holders to see this come to pass.

Cablevision Class A common stock will continue to trade “regular way” on the New York Stock Exchange under the symbol “CVC” before and after the spin-off.  Those holders of Cablevision Class A common stock who sell Cablevision shares regular way on or before February 9, 2010, will also be selling their right to receive shares of MSG Class A common stock.  Cablevision’s Class B common stock is not listed on a securities exchange.  MSG Class A common stock will begin trading on a “when-issued” basis as “MSGNV” on NASDAQ on January 25, 2010; on February 10, 2010, the stock begins trading under the symbol “MSG.”

The business of Madison Square Garden consists of MSG Sports, MSG Entertainment and MSG Media.  This might not be as good as going back in time and getting holders to agree to that $36.36 go-private management buyout from the Dolans, but it will have to do for now that the private equity bubble has burst.  It will be interesting to see if Mario Gabelli of GAMCO Investors, Inc. (NYSE: GBL) will be as vocal on this spin-off as he was against the Dolan-led buyout offer back during the private equity bubble.

JON C. OGG