Viacom Sells Madison Square Garden Empire to Cablevision-ITT Partnership for $1.075 Billion

Strategic Insights -

Viacom Inc. announced yesterday that it had agreed to sell its Madison Square Garden sports and entertainment empire to a partnership of the Cablevision Systems Corporation and the ITT Corporation. Although the purchase price of $1.075 billion in cash appears to be a significant amount, many analysts believe it far exceeds the Garden's actual worth, which is estimated to be between $600 million and $800 million. The sale includes the Madison Square Garden arena, the New York Knicks and New York Rangers, and the MSG Network. Viacom will be able to use almost all the proceeds to pay down the considerable debt it took on when it acquired the Garden properties in March as part of its $9.7 billion acquisition of Paramount Communications.

Key Takeaways:

  • The sale price of $1.075 billion is significantly higher than the estimated worth of the Garden, ranging from $600 million to $800 million.
  • Viacom will use almost all the proceeds to pay down its debt from the acquisition of Paramount Communications.
  • The partnership between Cablevision and ITT will own the MSG Network and have control over New York Yankees baseball games, as well as the New York Mets baseball team, the New York Islanders and New Jersey Devils hockey teams, and the New Jersey Nets basketball team.
  • The deal raises antitrust concerns, as Cablevision will have significant control over the New York television sports market.
  • Liberty Media, the other bidder, dropped out after declining to raise its $1 billion offer.
  • The deal could be subject to review from the Justice Department and the Federal Trade Commission.
  • ITT is putting up 85% of the money for the acquisition, despite having no experience in the sports business.
  • Cablevision is expected to become a 50-50 financial partner with ITT within a year.
  • The partnership plans not to sell off any Garden assets, but to keep the arena, sports teams, and cable network as a single business.

Statistics:

  • The sale price of $1.075 billion is 37% higher than the estimated worth of the Garden ($600-800 million).
  • Viacom's debt from the Paramount Communications acquisition is approximately $9.7 billion.
  • The partnership will pay $700 million in cash and $375 million in borrowed money for the acquisition.
  • Cablevision's upfront cash commitment is about $100 million.
  • The ITT-Cablevision partnership plans to keep the arena, sports teams, and cable network as a single business.

Sources:

  • "Viacom to Sell Madison Square Garden to Partnership of Cablevision, ITT" (New York Times, Aug 26, 1995)
  • "Cablevision and ITT to Buy Madison Square Garden for $1.075 Billion" (Wall Street Journal, Aug 26, 1995)
  • "Viacom Sells Madison Square Garden Empire to Cablevision-ITT Partnership" (Variety, Aug 26, 1995)