Yet Another Value Podcast - Jon Boyar from the Boyar Value Group on the awful $MSGN / $MSGE deal

Episode Date: April 5, 2021

Jon Boyar from the Boyar Value Group returns to the podcast to discuss the proposed merger between MSGE and MSGN. To put it bluntly, the deal is a disaster with absolutely no strategic rational, and Jon walks through all of the reasons the deal doesn't make sense.Jon's first podcast appearance: https://youtu.be/J2trsM41DTUBoyar's letter to the MSGN board: https://www.boyarvaluegroup.com/blog/the-boyars-value-groups-letter-to-james-dolan/If you're interested in hearing more about Jon's take on the different pieces of the MSG empire, email [e-mail] and put Dolan in subject line.Chapters0:00 intro1:15 MSGE / MSGN overview and background8:30 Trying to layout the thesis behind the merger11:25 Diving into the sports betting upside15:15 Pushing back further on the deal bear case20:30 Discussing majority of minority provisions23:55 MSGE's Sphere28:35 Dolan's capital allocation track record32:30 Who else might bid for MSGN

All right. Hello and welcome to the yet another value podcast. I'm your host, Andrew Walker. And with me today, I'm excited to have on for the second time, John Boyer, who is a principal at Boyer Investment Group. John, how's it going? Doing great. Going great. Thank you. Thanks for having me. Hey, it's great to have you back. Let me start. You've been on the podcast before. You said, you know, I start the podcast the same way every time. That's by pitching you, my guest. People can listen to the first podcast we did, which I'll all include in the show notes if they want to hear the full pitch. But, you know, it We've been talking on and off for the past couple months since that podcast. I've always respected y'all's work. But since then, you know, my respect's grown. It's really been a pleasure to swap thoughts and stuff. And I'm, you know, just happy to have made the connection and happy to have you back on here today. No, it was a lot of fun. I really enjoyed it.

And we certainly have something interesting to talk about today. We do. And we've got a lot of similar interest. You and I are both really interested in the media space and cable space, which makes it great. But we do have something to talk about. It is the merger of MSG networks, the ticker is MSGN, with MSG Entertainment, the ticker is MSGE. As our listeners might guess from the tickers and the names, these companies do have a lot in common, but they're merging. I think you and I both have thoughts on the deal, but I'll just toss it over to you.

What are these companies and why are they merging? The short answer is I don't know in terms of why they're merging, and that's, I think, why we're talking. And again, thanks for having me. And I really enjoy, just as a side note, your latest blog post. I think you released it yesterday. It was a great read. So the merger. It's an alphabet soup, literally.

So I'll just break down all three entities really quickly. Yes, perfect. So you have originally, well, they take a step back further. In 2007, Cablevision, which owned Madison Square Garden, AMC Networks, Cable Vision itself, the Garden, the networks, everything, tried to take itself private. They had supervoting shares, and what they did, which was extremely shareholder friendly, was say, hey, we are going to offer X. if you don't, we're not going to vote our shares and the majority of the minority will approve it. They didn't like the shares. They didn't like the price.

And, you know, my former boss, Mario Cabelli, was instrumental in putting the deal down. And I just wanted to define, they was the Dolan family who at the time were the controlling shareholders of Cablevision, now are the controlling shareholders of all the MSGs. I just want to clarify who the day is. Exactly. Exactly. They are the Dolan, specifically James Dolan, who is the one really running it, who, if you're a Knicks or Rangers fan, probably have a very strong view of him. So they wouldn't let the deal go through. And after that, they found shareholder religion. Cablevision had the highest payout ratio in the cable space. They levered up their balance sheet, paid out a large special dividend. They spun out MSG initially. Yep. And then they did another spin out.

They spun out MSGN, which is the broadcast home essentially of the Knicks and the Rangers to highlight the value of their sports media rights, extremely shareholder friendly. So they did that. We plotted them. And MSG was a fantastic performer. And then in April of last year, it took a while, but it finally happened in April, they spun out MSG again into two entities. You have MSG Sports, which owns essentially the Knicks and the Rangers, just roughly.

And then you have MSG Entertainment, which owns their entertainment business. It owns Madison Square Garden. It owns the air rights, as well as a boatload of cash, as well as they're in the middle of doing something that's quite controversial called the MSG sphere in Las Vegas. Yes. That is the 50,000 foot view of what each entity has. Beautiful. So there was a Bloomberg story about two weeks ago, two and a half weeks ago.

You and I both saw it, and I think we chatted about it after that MSGE, the entertainment company, was going to buy MSGN. My initial reaction was it was a Cove reporter for Bloomberg who very easily could have messed up, messed up the signal, you know, the stuff. Could easily be done. Because in our mind, the logical buyer of the networks are the sports teams.

It makes a heck of a lot of sense. If you're a buyer of a sports team, you would want to own the broadcast rights to it. It just makes sense. There's absolutely no strategic rationale that I can think of besides, you know, public company costs that would make it so that it made sense for MSGE to buy MSG. There's nothing. Even on the call after it was announced, they couldn't really articulate a real synergy. It was ridiculous. And to make matters worse is they're stealing the company.

They're paying, I think, five times, five and a half times, EBIT off for this thing, where if you look at a comparable, the Yes Network, which is the broadcast home of the New York Yankees, among other things, was sold in a for sale because Disney owned it when they bought Fox and they had to get rid of it, I think, for eight and a half times. And I would say that's a pretty good comp. And about a year or so ago, maybe a little bit longer, MSGN, who's been unbelievably shareholder friendly, did, you know, bought back 20% of the shares of MSGN. So presumably they thought the shares were cheap, you know, if they were going to buy back 20% of shares, they levered up to do so, at $16, which is roughly where the deal is being done. It's a fixed, it's a, it's based

on the price of kind of MSGE. But so the deal is unbelievably, you know, they're stealing it. And my get, you know, there's two reasons why they could be doing this, at least in, in my mind. one, MFGE wants a great source of cash to help fund the Sphere initiative, which is not a legitimate reason to do this. It's, you know, it's not in shareholders' best interest. They still have a fiduciary responsibility to MSGN shareholders. Or two, they are flushing out another buyer because they've essentially put the company in play and there are numerous potential buyers for it. Sinclair comes to mind. They own regional sports networks. Yep. Oncasts, which we discussed you and I before, charter, maybe even a private equity firm, but you don't have the synergies to do that

because the free cash flow is enormous. So the deal is a real head scratcher. Um, The Dolan shouldn't be allowed to get away with this. It's a definition of self-dealing. They're on both sides of the transaction. So how they were able to do this, quote, unquote, independently is a joke. So that's my long-winded way of that's why I'm here, besides all I can talk to you. No, I appreciate that. And look, I'm going to start out by saying, I agree with you.

This is one of the dumbest deals I've seen public companies doing. I think MSG has a cash flow problem as they try to build the spheres. And Dolan looked and said, oh, there's a lot of cash flow over at MSGN. Let's go take that cash flow and use it for my pet project, the sphere. But we can get there. Let's start with the devil's advocate case, right? So you and I both, I think, agree. No strategic rationale.

But let's try and put our hats on. You're an independent committee supposedly approved this. What is the upside? Why are these two companies combining? If you were trying to put on your best face and say, why this deal makes sense. What's the deal rationale here? The deal rationale, if I was on their side, you know, you would say that RSNs, you know, regional sports networks, you know, there's a bubble in them and you have to worry about, you know, will MSOs, multi-system

operators, you know, like charter, et cetera, will they continue to allow their subscribers to pay such high prices for it? And at some point, that bubble is going to burst. On the surface, it's a decent argument on the surface, but if you peel back the onion just a little bit, you have one of the biggest changes in RSNs going forward that is getting some attention, but not nearly enough. So you have this pandemic, obviously. We're going to have to pay for it. You know, New York State, you know, Cuomo yesterday, you know, Nazis legalizing cannabis. Yep. Whatever, you know, whatever people think about that is, is perfectly fine.

The next way they're going to raise money, as New Jersey did, is to legalize sports gamble. And that makes MSGN, the network that broadcast the games, unbelievably valuable because it turns into, literally, you know, to take a phrase from the 90s, must see TV. Even when the Knicks stink, which is a large percentage of the time, although they are at 500 this year, I think they're 24 and 24, and they're in playoff contention, if you're betting on the game, you're going to watch it. And cable, you know, in the New York area, you have, you know, you have charter, you have Verizon, you have pretty competitive landscape. And I don't think any of these companies, except Charlie Ergen, are going to risk losing a loyal fan base or people wanting to bet on games, which is distinct, by shutting off the MSGN spigot. I just don't think it's going to happen.

And the writing's on the wall. If it's not next year, it's a year after. There's going to be legalized sports gambling. So the future growth prospects of MSGN are fantastic. I mean, advertising, you know, sponsorship opportunities, which is really probably on the MSGE side, but so many things could happen. You know, what upsets me here is I agree with you.

You know, for years I've thought MSGN, if and when sports betting comes, they are going to be a mammoth beneficiary. And what upsets me here is, you know, the deals announced, and a week later, sports betting, you know, starts getting, maybe it's this year or next year, but it's coming, right? So you've got timeline on that. And we've got visibility. to how valuable a regional sports network is for this, right?

Like, I think back to two things. First in their, I think it was their last earnings call. MSGN came and they said, hey, you know, we've been doing these silly interactive apps that are just free to play. And when people engage with them, their engagement with our product goes through the roof, right? I think they said if somebody uses one of the interactive apps, they watch four to five more games per season than they did before they started using them. And they spend like, you know, hundreds and hundreds of more minutes watching games

and watching our programming. So that's just with a silly free-to-play game with sports betting. Like, are you kidding me? And then you've got the evidence that sports betters really value RSN's as marketing. And you mentioned Sinclair, who I'm sure we'll talk about when we talk other bidders, but Sinclair did that deal with Bailies. And Bailies rebranded all Sinclair owned, it was Fox SportsNet, and they're rewriting all of them as Bailies. And Bailies gave them $200 million in equity, which I think is worth like $5 to $600 million now, once you factor in the warrants. they're going to pay them tens of millions per year and licensing and advertising all these fees.

And you look at MSGN and you say, this is the freaking best RSN in America outside of maybe yes network. And they haven't branded it yet. Dave, sports betting is on the come like Fox SportsNet or Baileys or whoever. Somebody would pay huge, huge amounts of money for all this. And it's right there and MSG is buying them, you know, right before all that comes out. It's no, it's literally, you know, the Dolans are really taking advantage of their super voting shares.

The only saving grace is, you know, we get MSGE shares, but that to me, it leaves a horrible taste in your mouth. It also is how will MSGE treat their shareholders going forward? And it gets diluted. I mean, muddy money is the MSGE story, which was a, okay. hopefully we're at the tail end of the pandemic. Hopefully, I have no idea. But people are going to start going to games. People, you know, I've been a very vocal critic of the sphere, which I think the estimate is $1.6 billion to build. But Dolan might be right. It might be, you know, by the time it's built 2023, 2024, Vegas could be running on all four, all cylinders. And it's a shiny new thing. You got to say, you know, it's just the whole thing is extremely disappointing from a shareholder perspective. I've been very public over the last couple of years defending the Dolans because they have been shareholder friendly. And why they would do this when they know they're going to get sued.

I mean, you and I talked yesterday. I mean, this doesn't get nearly as bad. But Murdoch, David Murdoch, not Rupert, I mean, we were investors in dull foods, and they did a deal. Our shareholders and our clients, I think, made a decent amount of money. But he utilized his position and ended up getting sued. And I think he had to pay $150 million personally. I'm still getting checks from the, you know, this transaction took seven, it was seven years ago from the dull transaction.

I mean, it's in today's day and age of activist investors. how they think this is going to happen is beyond. Well, let me put on my kind of Dolan or MSG hat or whatever and push back a little bit, right? Like, I think one of the pushbacks that both you and I have, but they could rightfully push back on our pushback and say, hey, look, did we buy 20% of the company at 16 or 1650 or whatever 18 months ago? Yes, and we thought it was cheap at the time. did yes network transact at 8x and we're kind of transacting this at 5x or so despite sports betting being on the come yes all that's true but COVID happened since then right and cord cutting has accelerated dramatically the outlook for RSNs I think is much much murkier you know nobody knows what's going to happen but are their subscriber base is

probably down 15% in the past 18 months maybe a little bit more you know the outlook's murkier so I think their pushback would be, hey, what we do here is we merge MSG and MSGN, and there are going to be some revenue opportunities, right? Like you look at the Miami Heat got a ton for their licensing, for licensing their arena to some Bitcoin company or something, you could say, hey, I bet you draft kings or whatever the sports betting company would be. I bet you they'd pay more to rebrand MSGN and Madison Square Garden to the drafting arena and the draft king channel than they would just for MSGN.

or just for MSG. So you could see some synergies there. I'm just trying to put the bullcase on, but how would you push back on that? I would say what in that scenario that you laid out that they couldn't do contractually. There is absolutely nothing there where you know, you get a representative from MSGE, get a representative of MSGN, you get a representative of the draft kings in your situation, and they hammer out a, hammer out a deal. And, you know, just the same way that MSGS, the sports team and MSGE have a deal dealing with selling suites and all of that. So there's, or the way that they share the Dolan's planes, you know, the cost of that. This is all can be done contractually.

There's no reason why you need to have a transaction in order to effectuate this. And yes, COVID clearly happened. But also, you know, and you had a decrease in subscribers because you had people. people, you know, also fleeing New York and probably canceling their cable. Some people are going to come back. You have long-term contracts in there. And you also have other areas that MSG and, you know, maybe they do a deal with, you know, Amazon or other type of things where they can, you know, or other streaming or over the top type of type of services. So there's lots of different ways to do it, but to justify a five times multiple is ridiculous, especially when the yes network comp was a for sale. Disney wanted to

get rid. They had to of it. Logical, you know, and, you know, they cared a lot more about buying Fox than they did about selling the, the Yes network. And what's really interesting is if you look at the one of the buyers of the S network, I think they bought 20% was Amazon. I I think that's right. Yeah, and I was going to mention that. Yep. So you have now non-traditional players getting into this space. you know, what is Amazon going to do with it? I'm not 100% sure we'll see, but you have a whole pool of bidder. So why not open this up? Let's see what Draft Kings would pay. I mean, I know that was something you mentioned yesterday. I hadn't really thought about that for this. Let's see what the cable companies. I mean, Maffa, who I respect a lot, you know, helps run John Malone's empire. As always said, the two logical owners of a uh the media of an rsn or the sports teams uh that that they broadcast or a cable operator you know let's open it up let's see what let's see what they'll pay why and the other thing is just going back to msge really briefly and i i think the reason is as we alluded to earlier is

they have a cash problem yep there's two things that they can do with that one stop spending money slow down the construction of the sphere in London. Let's see how Vegas goes, used to cash from Las Vegas to fund future initiatives. They could also get a partner if they want to do Vegas and do London. Or they own, I know this is not necessarily the ideal time, but they own the air rights above Madison Square Garden Entertainment. They literally own air. I mean, it's the strangest concept. And they're very valuable. Maybe not right now because, you know, everyone's talking about the death in New York City. But if you wait a year or two, I bet you that those air rights would be extremely valuable in a company like Borneo or another one

would pay for them. And you're talking hundreds of millions of dollars. It's not too far from the LP value of the, of the, of the, of the, of the, of the, of the, of the, of the, of the, of the, of the, of the, of the, of the, of the, of the, of the, of the, of the, of the, it's baffling. So it's baffling. I want to talk buyers more in a second, but I do want to dive into two things that we've kind of mentioned in passing. The first thing, you know, if we just think back to the original how all of this started, right? It was cable vision and the Dolan's offered to take it private, and they had a majority of the minority provision, which says, hey, you know, the Dolans control the majority of the majority of the voting rights, but we want to make sure that the minority shareholders agreed to this deal. So if the majority of the minority shareholders excluding all the Dolan votes vote for it, then the deal gets approved. Minority didn't do it that time, so the company stayed public, and that's how you kind of end up with all these spins and the alties take out and everything. One thing that's interesting with MSGN and MSGES, I suppose, but I don't think there's a majority of minority clause in here, right?

So it's just majority of the vote and the Dolans have super voting stock so the Dolans can kind of push through what they're doing. what do you think about that and why do you think they didn't include you know we've got a precedent 15 years ago they included it now they don't why do you think they didn't include it here well maybe because they weren't able to steal cable vision it's probably is they learned from their mistakes although i mean i think they probably knew i mean these are not dumb people they're smart people that the price was too low given all the given all the assets that they own so i i don't know kind of why they did it. It's horrible corporate governance. It's going to make a fantastic case. I don't know if this is, I'm not sure. I mean, I'm a recovering lawyer. I'm not sure if this has been litigated. We're on both sides of the transaction. You have a controlling shareholder. From what I understand, you know, you always have to have a good process. And they hired, you know, it looked like Wattel. They hired Paul Weiss. I mean, the white shoe of the white

you law firms to guide them through this. But it's still, you can't just take a company and say, hey, we're going to give you a token amount. You know, and it's just incredible. I don't think I've ever seen a transaction where it's a share for share deal and they announce it and both sides of the transaction go down. Like that, it is pretty crazy to destroy that much value in a share for share deal, which MSG and MSGN both went down. You know, the day of, I think they were down 10%. but if you kind of look over the past month, or it's been a little weird, but I think they're down like 25 to 30% each

because nobody likes this deal. It's silly. As Andrew Barry of Barron's wrote, and I love his line, that the Dolans pulled the rare feat of alienating both sides on a takeover transaction. I mean, this is really never been done before. It's crazy.

I mean, as I alluded to earlier, Now you really lose, you know, you always had that quote unquote Dolan discount, but now who's going to trust them, you know, if this is what, if this is how they're going to treat minority shareholders. You know, Jacob, Jacob Podell, he's a NBA center, I believe for the Raptors right now, or maybe the Spurs, I think. He airballed two free throws in a row the other night, which is extremely rare for a pro NBA player. Like, you and I might be able not to air ball two in a row. So this is the rare case of a double airball and a merger case is kind of how I've been thinking about it.

Let's talk about the sphere real quick because we've talked about it. It's a multi-billion dollar. They're going to build one in Las Vegas. It's going to be state of the art. They're planning on building another in London, state of the art. It's for you go, great acoustics, everything. And you and I, I think we both hate this deal. James Dolan would probably come back and say people hated it when we renovated MSG.

We spent a billion dollars on that. People thought it'd be awful. We probably got low teens, IRA, maybe even better on that renovation. People hated it when we bought and renovated the form. That deal turned out great. So he might say, hey, maybe I just know what I'm doing when it comes to renovating and buying and building big arenas. How are you thinking about the form, maybe just a little bit more color on the, or sorry, how are you thinking about the sphere, maybe just a little bit more color on what's going on there? I'm willing to give him the benefit of the doubt.

he yes the the original i think um costs of renovation was about 500 million dollars for the garden ended up being a billion shareholders got really upset and it was a he was correct it was it was a great use of of capital i mean you just have to look you know everyone said the barclay center was going to kill msg and you know barkley center is nothing by comparison and he did a great job. He made a lot of money in the forum. It was a fantastic deal and he sold it to bomber and he kind of extorted him a little bit or held him, held him up for it, which was, he's a good, shrewd businessman. But, you know, to me, he has literally the world's greatest arena. Why mess with a good thing? Why not take on a bigger partner and just maybe not have

all the equity and de-risk it. So what we did as, you know, investors, when we do our valuation, we cut the cash in hand on hand, which was substantial, was well over a billion dollars in half. And we still, on a now and $82 stock, get to about $116 roughly, then that's with a 50% haircut. So we could be wrong. Absolutely. And I'm not saying, don't do the sphere. I'd rather him not. I'd rather than take it on an equity partner. I think in today's world, it wouldn't be a problem to get someone there. But all these growth initiatives are fine. Just don't use MSGN as the piggy bank. That's really all I'm asking. You know, and I agree with you. Sphere might turn out well, but I do, you know, when they first

announced the Sphere, I think they were saying a billion two. And then I remember their, the contractor came out and gave them their first estimate, and they said, no, it's going to be a billion five. And MSG, you know, they put that out there and they came out and they said, we think the contractor's negotiating because, you know, the contractor gets paid. I might be misremembering it. You know, it's been over the years and there's been COVID in the meantime. But they were saying, hey, the contractor says a billion five because they make, you know, 10% or whatever.

So they start high and then you negotiate it down. We're going to get it to our number. And then in December, they fired the contractor and said, oh, it's actually going to be a billion six. And it just got all the makings of something that's going to be a boondoggle. and it's also got something where, you know, it's no secret that James Dolan's real passion is music. This is a sphere. It's built for musicians. It's built to be the best acoustic environment in the world. It's got all the makings of a boondogle and it's got all the makings of, hey, my passion project's going way over money. I've got all this cash flow over at

MSGN. I need to go get that just so I can keep funding my passion project. And that's not shareholder value friendly, very obviously. Yeah, I agree with everything you just said, it's, yeah, it's, you know, one point, I mean, who's ever dealt with a contractor and think it's going to go in lower than they expect it? Of course it goes higher. I mean, that's just anyone who's ever built a house or done construction on a house. Well, we'll test that that you have to add 20%. So yeah, it could be higher than the, you know, the 1.2 turns into 1.6, which turns into 2. But it's still, you know, when you have other options, I mean, They were, you know, MFGE, you know, mortgage some of their properties.

They did not mortgage the garden, which they could, I'm assuming. There's a lot of other ways to fund this without disavanching minority shareholders. So he has to stop thinking, you know, he just should either stop spending so much money or figure out other ways to fund it. I want to talk two more things before we go. The first is I think you and I, you know, I think MSG for a long time traded with an enormous stolen discount because people looked at his history of managing the Knicks and said, this guy is awful. And people assumed that his capital allocation was awful as well. I think both you and I said for a long time, actually, if you

look, it's gotten pretty good. It's probably, you know, people are saying it's F and it's probably somewhere in the B range, you know, after Cable Vision bid got rejected, they started, they did the dividend and they started repurchasing shares. They did all these spin-offs. I think they were pretty rational and buying back shares. Would I have rather than been more aggressive? Absolutely. But I they did a nice job buying back shares, all this type of stuff. They did nice deals, you know, the form, everybody hated it, MSG, we talked about this. But I think recently, you can look and say, the sphere seems to be a boondoggle. This deal is awful. And, you know, everyone forgets, they bought tau for a pretty nice multiple. And that deal seems awful as well. So, you know,

when I look at this, I say, were you and I defending, you know, I don't think you and I were over here saying Dolan's the best capital allocator ever, but we were saying maybe he's a C, maybe he's a B, he's not an F. Was he just getting lucky for a while? Is he actually an F or a D-minus? Or like, it kind of seems like every worry everyone ever had about him is kind of coming true. I don't think he's going to ever make the Outsiders book in the second edition. He's not John Malone. He's not Warren Buffett. He's been fortunate in that he has unbelievable assets. Unbelievable. Unbelievable. And, you know, he's been a decent steward of it, and he's been generally fair.

So was he lucky? I mean, listen, he got lucky in the sense that the value of sports rights and sports teams since 2010 has gone up dramatically. That certainly helped. But he, you know, I think he's generally done an okay job. But think about how much more valuable the teams would be if he actually, what would happen with the Clippers? when Steve Bomber came in. You had an owner who was enthusiastic, who wanted to spend money on players who really turned around the team. What happens if that was in New York? I mean, the team would be unbelievably valuable. And he just kind of gets in the way. So, you know, maybe it's

time for him to reevaluate all of his assets. Clippers are a great example. Warriors, you look at those. I mean, they were one of the least valuable franchises in the league. And then, you know, you catch a little bit of lightning in a bottle with Steph Curry and Clay Thompson, all that. But now they're one of the top three most valuable franchises. You look at what they built out there. It's incredible. If the Knicks, you know, they're always around the most valuable franchises. But that's what the team, you know, more than half the teams make the playoffs every year.

And the Knicks have made the playoffs, what, three times in the past 20 years? I mean, the team is a laughing stock and they're valuable just because of the city. Like, if this was a good team and they've got all these advantages, just imagine. You know what else upsets me up, MSGN deal? We'll talk buyers in a second. The Knicks are finally good, right? Like they've got good assets. They've got all the draft picks going forward.

They might make the playoffs. And we're selling the company, quote, unquote, to MSG right now, right before that playoff boost comes in and our ratings are going up. People are getting excited. We've got a future. And they're selling them right now. It's so frustrating. I echo your frustration.

When I wrote the letter this weekend, it was somewhat cathartic, but it also gets you really upset. And hopefully, you know, listen, you have some very influential shareholders in, and very good shareholders in MSGE, MSGN, who own, you know, well over 20% of both companies. And, you know, hopefully they use whatever power that they can to try and bring another bidder. Yeah. Let's talk other bitter real quick. I think that's a great way to wrap this up. So as we talk, I think MSGN is trading around $15 per share.

And I think the value of the, you know, if the deal goes through and you got the MSG stock, I think it would be a little bit over 14. So MSGN is trading through the deal. Clearly people are placing optionality on MSGN is in play. There might be another bidder. This is a cheap price. I think just about anyone can justify a bid. But let's walk through the most likely bidders.

You know, you can do top three, why, whatever you do. but let's just talk about who you think the most likely interlopers here could be. I don't think MSGS will come in, so I don't think the Dolans are going to bet against themselves. I was wondering if you had like two controlling entities and then the third just randomly came in with a topping aggressive bid. It would make no sense, but it would be really funny. Yeah, well, a lot of things this year that happened have made no sense.

So that is true. Top three bidders, probably the most likely outcome is that. the Dolans pay a little bit more. Yep. You know, they're forced to pay a couple bucks more. Unfortunately, I think that's, you know, probably what will happen. But, you know, an asset like this doesn't go on sale very often. And Sinclair, you know, charter, Comcast, they come in.

I think those are the logical people, people who have that in the, in the, you know, have the MSOs in that footprint. You would mention yesterday, which I thought was fascinating, was I believe, a draft Kings. Yep. That could be interesting, too. I honestly hadn't really considered that, but, you know, I don't know what their kind of their capital situation is.

But, yeah, that's certainly a possibility. And you have non-traditional media players getting into the business. I'm not saying that they're going to do this, but as I mentioned earlier, Amazon bought 20% of the Yes network. Not 100% sure why. But as I said, these are valuable assets. It's well known that sports gambling is going to be, should be legalized in the next couple of years. And I think there's a lot of players who are going to want to compete. Yeah. If I, my list would be, I think the most likely would be Sinclair. I think there'd be a lot of synergies with the Sinclair, you know, they own all the old Fox RSNs.

I think that's a very obvious potential there. They've already got the Bailey's deal struck. So I think there's lots of potential synergies there. I think Amazon is an interesting player. You mentioned they had the 20% of Yes Network. They just got Thursday night football rights. So clearly they're starting to dip their toes into some sports rights. There are questions of, you know, Amazon's obviously a national slash global player.

Are you getting, it's our MSGN is a local player. But I do think there could be some interesting things. things there. Draft Kings is probably, I think there's a chance, but I do think it's probably a little bit far out there, but it does make sense, right? Draft Kings comes, buys them, rebrands them. Hey, we've got the most visible RSN in the world. It's going to be the largest gambling market in America.

Let's go get that. It gives us a lot of cash flow, which we can use to fund all of these customer acquisition cost. So I do think there's a possibility there. I would probably discount charter and Comcast just a little bit because, I think Comcast has had enough, I think both have had enough of the RSN business and, you know, charter with what's happening with the Dodgers channel out there. I just kind of, but I wouldn't completely discount it. AT&T's got a lot of RSends, their possibility, but I think there are a lot of values. Honestly, at this price, I think a private equity firm could come in and lob in a bit and they could just run this thing for cash flow and make more than enough money because people forget MSGN is not just an RSN. This is the best RISN in America, right? They've got, they have the rights to the Nixon Rangers for another, 15 years. It's in the best market for an RSN in America. This is the best RSN in America.

It should go for more than your typical RSN. It should go for something like a yes network. So yeah, anything else you want to say on that? Yeah, no, I agree with you. And just kind of curious your thoughts on an activist shareholder kind of coming in. I mean, you know, this is too small for an icon probably. I mean, it's a small equity value. but do you see someone coming in and you think that's a possibility? You know, I do think it's a possibility. I am scratching my head a little bit on who the activist shareholder would be because, as you said, like, MSGN is a, it's a quirky asset, right?

There aren't a lot of, it's a single, it's a single network RSN. There aren't any of those out there anymore. It's a little bit smaller than the big guy's size. But you know what? It is New York City. So if you, it is New York City. It's the Dolans. If you're an activist out there, just go do it, A, because the financial returns look attractive.

And B, you're going to make a name for yourself, right? So taking on Dolans. And one other thing I'll mention, MSGN, obviously, they're levered, right? But they do have about $250 or $300 million in cash on their balance sheet. It's not net cash because there's more debt on their balance sheet. But that's about $4 per share in cash, if I'm doing my math, right? I mean, the Dolans could very easily change this transaction around by announcing, hey, we're going to pay out a $3 per share MSGN dividend when we close this.

Keep the terms the same right now, but add a $3 per share dividend. I think that would be a topper. I still think it would be a bad deal, but I think it would make it a little more palatable. I don't know if you have any thoughts on that. Yeah, no, I mean, it's certainly better than what we have now. I mean, yeah, it's a cash flow machine. I mean, it's not necessarily a, you know, it's somewhat misleading, but I think it's like a 20 or 25% free cash flow yield.

I mean, obviously there's debt on the company. So, yeah, it's, as you mentioned earlier, you know, private equity firm can do some interesting things with this, especially if perhaps, you know, they were able to negotiate another five years of the contract. Yeah. With the Knicks and the Rangers. So there's so many things that could be done.

I think it's unfortunate that it happened this week because clearly everyone's eyes have been glued to the, family office tobacco, and this kind of was swept under the rug. But I think, you know, maybe you have some people who over the next couple of weeks come out of woodwork, we shall see. Well, look, you published a really nice letter to the board a couple of days ago. I'll be sure to include that in the show notes. I'm going to keep tweeting, and we might try to do a press release as well, because this is a bad deal. Shareholders deserve better. And, you know, Dolan might be doing just to fund a pet project, but every entity he has, has a Dolan discount, and this is a reason

why they have a Dolan discount. And I think if he improved the terms or canceled this or something, I think it would help the overall Dolan Empire, if that makes sense. No, absolutely. No, it's really what. And one other thing, which is just kind of funny, I don't think he's on the MSGE board, but Nelson Peltz is on the MSGS board, you know, Yep. Shareholder rights activist, et cetera. I mean, the fact that he's even associated with something like this is ridiculous. So it's, you know, hopefully some of the corporate governance people come on out and, you know, we get a better return for shareholders.

And yeah. Your old boss, Mario Gabelli, might be the one we need to call to see if he can do this. He did it with, he got something going with Dol and he's pushed back on these before. This is in his wheelhouse. So maybe we'll hear from him at some point. I certainly hope so. He's a very active tweeter, and it's curious that he only had one very cryptic tweet on the MSGM deal. So I wouldn't be surprised if we heard from Mario, certainly in his wheelhouse, certainly not a shy guy, and he's a terrific media investor.

So I hope to hear from him. all of that is true. The only thing I'd say is all of his tweets are all of his tweets are a little bit cryptic, so it's tough to sign that just this one. But I agree. I think this being in his real house and it'd be great. Anything you want to anything else you want to say here before we wrap up? No, thank you for having me. It's great. And again, I really enjoy your blog that you publish. So a lot of really great links and also your commentary. Obviously, you've been I think right on with SPACs and all sorts of other stuff. really timely and really, really interesting to read. And you have to, I know you did it tongue in cheap, but you have to change the name from yet another value blog because it's not yet another value blog. It's a great blog. Well, look, I really appreciate that. I really appreciate our conversation. Really appreciate you popping on the pod. And I appreciate you trying to protect your holder value at MSGN because I'm passionate about it. It means a lot to me. And appreciate everything. So, John, been great having you on. Looking forward to the third podcast and

we'll chat soon. Absolutely. Thank you.