Why A Buyer Of Madison Square Garden Appears Unlikely

While the New York Knicks haven’t put on much of a show at the Garden in the past decade, the UFC returning to Madison Square Garden Networks (NYSE:MSGN) on November 4 is providing hope that the venue can diversify itself from sports franchises.

Loop Capital has upgraded its rating from a Sell to a Hold, but it doesn’t believe there will be a sale of the company anytime soon.

“We believe the market has finally come around to our view that a sale of this company to a strategic buyer is unrealistic in the current M&A environment. We also believe a financial buyer is likely to pass on MSGN, as the company is not particularly free cash flow generative at the moment,” said Loop Capital analyst David Miller.

Miller believes that in the current environment, there is no acquirer that makes sense, listing Disney, CBS, Viacom, Discovery, Twenty-First Century, and Sky PLC as all potential but unviable candidates.

Because Madison Square Garden is particularly dependent upon the performance and popuarlity of its franchises, the current state of both the teams it is housing does not make it an appealing acquisition at the moment. The Knicks are in disarray after firing Phil Jackson and arguably blowing it in the loaded 2017 NBA draft after taking a little known foreign player Frank Ntilikina in first round pick, who then suffered a knee injury in his first practice. The Islanders also missed the playoffs in 2017.

Loop capital price target on Madison Square Garden Networks remains at $19.


(Image credit: Stadium Parking Guides)