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Madison Square Garden stock jumps 10% after board approves plan to explore sports spinoff

Key Points
  • The Madison Square Garden Company announced on Wednesday it would explore a possible spinoff to create a separate, public company for its sports franchises, including the New York Knicks and New York Rangers.
  • The new entity will be entirely sports focused, "driven by the strong financial performance of the storied Knicks and Rangers franchises," whereas the existing one will focus purely on entertainment.
Kristaps Porzingis #6 of the New York Knicks 
Jim McIsaac | Getty Images

The Madison Square Garden Company announced on Wednesday it would explore a possible spinoff to create a separate, public company for its sports franchises, including the New York Knicks and New York Rangers.

Shares of Madison Square Garden jumped nearly 10 percent in the premarket Thursday.

The proposed spinoff would allow both the entertainment and sports companies to pursue separate business strategies and capital allocation policies, as well as give shareholders the opportunity to evaluate each company's assets and future potential, according to a statement. Madison Square Garden Company CEO James Dolan is expected to be CEO and executive chairman of both companies.

"We believe this proposed transaction would provide each company with enhanced strategic flexibility, its own defined business focus and clear investment characteristics," Dolan said in a statement.

The new entity will be entirely sports focused, "driven by the strong financial performance of the storied Knicks and Rangers franchises." It will also include the New York Liberty women's basketball team and a training center in Greenburgh, New York.

The existing company will focus on becoming "a leader in live entertainment with a growing portfolio of assets that will include state-of-the-art music and entertainment-focused venues" that Dolan referred to as "MSG Sphere." The entertainment company aims to open the first MSG Sphere in Las Vegas by the end of 2020, followed by one in London a year later.

Madison Square Garden emphasized there is no guarantee the deal will move forward as planned and did not set a time frame for the process.