Cablevision to spin off Madison Square Garden

Cablevision Systems Corp. said Thursday that its board has approved a plan to spin off as a separate company its Madison Square Garden business, owner of the New York Knicks, Rangers and the famed sports arena where they play.

In a widely anticipated move, the Bethpage, N.Y.-based company said the unit will be spun off to existing shareholders by the end of the year. The Dolan family, who controls Cablevision through a special class of shares, will retain control of the new company.

Investors liked the move, sending up shares of Cablevision by $1.62, or 8.6 percent, to $20.55 in midday trading.

The diversified company that owns cable systems and channels and the newspaper Newsday in addition to its sports and entertainmnet properties also reported an 8 percent drop in second-quarter earnings despite climbing revenue.

Cablevision said it earned $87 million, or 29 cents per share, in the most recent quarter, compared with $94.7 million, or 32 cents per share a year ago. Revenue rose 9.8 percent to $1.88 billion.

Results were roughly in line with analysts' expectations, according to Thomson Reuters.

Cablevision said the separation of its Madison Square Garden operations is expected to make it easier for investors because each company will now have distinct businesses. Without a spin-off or sale, cable investors buying shares of Cablevision have little choice but to contend with its entertainment businesses.

Analyst Craig Moffett of Sanford Bernstein said the spin-off boosts the free cash flow of Cablevision by shifting the cost of renovating the Garden, estimated at more than $500 million over the next few years, to the new company.

Moffett had speculated in a note before a conference call that Cablevision could also shift some debt to the new company, but management said during the call that the new company won't have additional debt put on it at this time.

Standard & Poor's analyst Tuna Amobi noted the spin off is "ill-timed given lackluster results" at the unit and high capital expenditure needs.

Cablevision said James Dolan, its chief executive, also will take on the role of executive chairman of the spun-off Madison Square Garden group. Hank Ratner, Cablevision's vice chairman, will add the titles of president and CEO of the new company.

Cablevision said for now it is not considering a sale of Madison Square Garden or any of its businesses, as well as any other operations of the cable operator.