BREAKINGVIEWS-A Knicks-Rangers split appeals to true fans

By Pranav Kiran

TORONTO, Feb 18 (Reuters Breakingviews) - Sports fans are always hard to please. A potential breakup of Manhattan’s basketball and hockey franchises offers a better chance to voice their opinions. James Dolan’s Madison Square Garden Sports MSGS.N (MSGS) said that the company’s board would explore separating its New York Knicks and New York Rangers businesses into two publicly traded groups. That could narrow a valuation gap with other sports teams by letting fans big and small apply the financial illogic of trophy assets to the franchise of their choice.

Until Wednesday’s announcement, the market valued MSGS’ equity at just under $7 billion. This is a discount of about 50% compared to recent stake sales and independent team valuations, according to BTIG analyst Tyler DiMatteo, who uses them to impute a worth of some $9.8 billion and $4 billion for the Knicks and Rangers franchises, respectively. There may be other reasons for the discount. The Dolan family owns 70.8% of total voting power through the company's dual-class share structure. So, the fate of any eventual deal depends on them. As recently as March last year, Dolan indicated he has no interest in selling. The board is still mulling the split, and there’s no set timeline yet. But a 15% stock price rise indicates that financial fans are pleased.

Yet, true value will likely be unlocked from a logic which isn't strictly financial. Each franchise has a slew of fans that might be willing to pay up to own part of the Rangers or Knicks. A stake in Madison Square Garden Sports simply doesn't have the same emotional resonance, or bring the same social credit at the local bar. For instance, the Green Bay Packers football team, run as a nonprofit, has in the past sold offerings with essentially no economic value to fans who only receive voting rights in exchange.

The real gains might come from private markets, where the same lust for one of a kind assets applies on a bigger scale. Even after the price pop, MSGS is still only trading at about 8 times financial year 2025 revenue. Deals involving the Boston Celtics and Los Angeles Lakers closed at much heftier 14 and 19 times.

Two powerful forces — billionaires and alternative asset managers — are shaping the hunt for sports deals. The number of billionaires has risen by 50% over the last decade. Rising asset values have whet their appetites. Investment firms like CVC Capital Partners and Apollo Global Management have committed multi-billion-dollar funds to the sector. Sports deals involving private equity firms have risen 60% between 2020 and 2025, according to PitchBook data.

Separating the teams into their own companies will likely attract some of that attention. It would be a financial win.

CONTEXT NEWS

Madison Square Garden Sports on February 18 said its board had approved a plan to explore a possible spinoff that would separate its New York Knicks and New York Rangers businesses, into two publicly traded companies. The New York Knicks company would also include the Westchester Knicks and the New York Rangers company would include the Hartford Wolf Pack teams.

The company said it expected a potential transaction to be structured as a tax-free spinoff for shareholders.

Shares of Madison Square Garden Sports were up 16% at 1032 ET.