Why I Am Long Madison Square Garden

MSG seems like a pretty darn good target. That said, I am not long MSG simply because I consider them ripe for M&A. On its own, MSG is already a pretty appealing investment. The stock registered a new 52-week high this past Friday. The way MSG describes itself in its most recent quarterly report makes it pretty clear that it hits each of the aforementioned five criteria pretty hard:

The Company classifies its business interests into three reportable segments: MSG Media, MSG Entertainment, and MSG Sports. MSG Media produces, develops and acquires content for multiple distribution platforms, including content originating from the Company's venues. MSG Media includes our regional sports networks, MSG network, MSG Plus, MSG HD and MSG Plus HD, collectively called the MSG Networks, and the Fuse Networks (Fuse and Fuse HD) ... MSG Entertainment presents or hosts live entertainment events in our diverse collection of venues, including concerts, family shows, performing arts and special events. These venues include The Garden, The Theater at Madison Square Garden, Radio City Music Hall ... MSG Sports owns and operates sports franchises, including the Knicks of the NBA, the Rangers of the NHL, the Liberty of the WNBA and the Connecticut Whale of the AHL ...

Multiple, diverse and synergistic revenue streams. Massive revenue ($373 million in the final quarter of 2011, which was down considerably year-over-year thanks to the NBA work stoppage). Multiple distribution platforms. Direct control over premium content. And, at least on a regional/local level, ubiquity. It's all there. Again, I am happy being long MSG with it on its current independent course. I have to think, however, that its doorbell is about to ring if it has not already.

If Comcast, for example, made a successful play for MSG, granted, it would not come close to the scale of Rogers or Bell, but it would form quite a corporation. Consider the scope of Comcast's business, as of its most recent annual report.

Comcast is a cable and Internet company; it is a media company (51% stake in NBC Universal); it owns several cable networks, regional sports and news networks, local television stations across America; it owns and operates Universal Pictures as well as Universal theme parks in Orlando and Hollywood; it also owns the Philadelphia Flyers NHL franchise, Wells Fargo Center in Philly and a facilities management and concession/food services company. MSG would fit nicely into the fold.

Of course, there's the issue of one company owning two NHL franchises. I do not think, however, Comcast would have much of a problem giving up majority ownership of the Flyers. In Canada, Bell already has an 18% stake in the Montreal Canadiens, which it should be able to keep despite the 37.5% stake it will have in the Toronto Maple Leafs as a result of its deal to buy Maple Leaf Sports and Entertainment. I could see a combined MSG/Comcast trimming stakes in both the Flyers and Rangers to make regulators and the NHL happy.

Later in the week, when I discuss why I am long TWX, I will discuss the possibility of Time Warner, Viacom (VIA) or Verizon (VZ) making a play for MSG or one another and why it makes sense.

For the time being, I am long MSG on its own merits. As with Rogers and Bell, I do not think Wall Street realizes the value that lies in the only-recently tapped revenue potential inherent in MSG's multi-platform synergy between sports, entertainment and media properties.

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