One of the best things about having a diversified stream of revenues from different operating units is that a company doesn’t have to rely only on one metric. Then again, investors love when companies decide to break up to unlock value and allow certain units to focus on their own growth.

Madison Square Garden Co. (NYSE: MSG) has announced that the company is exploring a separation of its sports businesses from its live entertainment businesses by creating two distinct public companies. In short, investors are likely to get a chance to directly purchase shares of the NBA’s New York Knicks and the NHL’s New York Rangers, along with other teams, while the second business would own the Madison Square Garden, Radio City Music Hall and other entertainment venues.

If the company does proceed with the proposed spin-off, the transaction is expected to be structured as a tax-free transaction to all MSG shareholders. The company also noted that shareholders would receive an approximately two-thirds economic interest in the pure-play sports company.

Madison Square Garden also outlined what each company would like. The pure-play sports company would include the New York Knicks and its development team, the Westchester Knicks. Also included would be the New York Rangers and its development team, the Hartford Wolf Pack. Then there is the New York Liberty professional WNBA sports franchise, although the company is currently exploring a sale for that team. Also included are the Knicks Gaming as the official NBA 2K eSports franchise of the New York Knicks, a majority interest in Counter Logic Gaming in eSports, and a professional sports team Training Center in Greenburgh, New York.

The Madison Square Garden venue operations would include the New York’s Madison Square Garden, the Hulu Theater at Madison Square Garden, Radio City Music Hall and Beacon Theatre, the Forum in Inglewood, California, the Chicago Theatre and the Wang Theatre in Boston. Other venue and operations would include MSG Bookings, MSG Productions, strategic entertainment joint ventures, an approximately one-third economic interest in the pure-play sports company, and approximately $1 billion in cash on hand.

The press release included that James Dolan will be the executive chair and chief executive officer of both companies. Dolan said of the new plans:

We are exploring the opportunity to further create value by separating our businesses into two distinct companies. One company would be a leader in live entertainment with a growing portfolio of assets that will include state-of-the-art music and entertainment-focused venues – called MSG Sphere. The other entity would be a pure-play sports company driven by the strong financial performance of the storied Knicks and Rangers franchises. We believe this proposed transaction would provide each company with enhanced strategic flexibility, its own defined business focus and clear investment characteristics.

The firm Jefferies likes the news, although it has been speculated by many value investors that Madison Square Garden could unlock its teams’ value for investors. Jefferies raised its rating on the stock to Buy from Hold and the price target was raised to $350 from $233, based on the move.

Madison Square Garden shares were down 2% at $266.23 on Wednesday ahead of this report, but the shares were indicated to open up 10% at $293.00 on Thursday morning. The 52-week trading range is $205.22 to $284.19, and the consensus analyst target price from Thomson Reuters was $263.91 ahead of this news.

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