Madison Square Garden Split Could Value Knicks at $5 Bilion - TheStreet

NEW YORK (TheStreet) -- The $2 billion dollar sale of the NBA's L.A. Clippers to former Microsoft (MSFT) - Get Report CEO Steve Ballmer may be one reason why executives at Madison Square Garden (MSG) - Get Report are considering splitting the company into two pieces.

If the L.A. Clippers are worth $2 billion, what are the New York Knicks worth?

Sure, Los Angeles is a huge market, but the Clippers franchise, and its brand, languished for decades as former owner Donald Sterling mismanaged the team, doing little to cultivate a fan base in southern California. The Clippers had begun to emerge from the abyss during the past few years helped in part by the NBA leadership in New York.  

As for New York, Madison Square Garden's Knicks remain a mediocrity, but the New York sports market is arguably larger and more dynamic than the Los Angeles, and the Knicks have a far richer history than the Clippers and a much larger and more dedicated following. The Knicks could be worth double the Clippers -- remember, we're not talking about Kobe Bryant's Lakers, we're comparing the Knicks with the Clippers. Heck, the Knicks still have Carmelo Anthony, and former Laker coach Phil Jackson has arrived like a white knight to keep MSG Chairman James Nolan away from the front office.

But for argument's sake, let's use a nice round number of $3 billion. Based on appreciation trends, if the NHL Rangers aren't worth a billion now, they will be soon. Add in a few more details that are less speculative: MSG's zero debt, a successful regional sports networks, a renovated arena and an NBA broadcast deal worth $24 billion through 2025, and the product as a whole may be worth more than its parts

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Put all of those factors together, and the assets being spun off could be conservatively valued at $5 billion. That just happens to be the market cap of the entire company known as Madison Square Garden at the close of trading on Monday. People aren't even talking about the entertainment assets, which aren't exactly weak.

So, little wonder that MSG is spiking. Perhaps, it didn't spike enough. Other investors may even have the chance to buy shares before MSG becomes fully-valued.

The one note of caution is this: Franchise values are only real when a team is actually sold. As a publicly traded company, that outcome is unlikely, especially in the short term. So, at some point after the fervor wanes, judging the value of sports assets will come back to revenue and profit.

Having said that, with the explosion of television revenue, that might not be an issue either. Who needs the Clippers when you have the Knicks.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.