John Rogers Comments on MSG Networks

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Apr 18, 2019

Other holdings underperformed in the quarter. Owner and operator of regional sports and entertainment networks, MSG Networks, Inc. (NYSE:MSGN) declined -7.68% in the quarter, mainly on news surrounding Walt Disney Co.’s (NYSE:DIS) forced sale of the recently acquired 21st Century Fox’s regional sports networks “RSNs”. The market is using this transaction, which includes YES Network, as a benchmark for MSGN’s valuation. The situation continues to be fluid and visibility is limited given the absence of official commentary from DIS and unconfirmed sources cited by the press. Aside from the pending RSN sale, the market has been focused on MSGN’s ability to successfully renegotiate affiliate agreements with linear distributors, gain incremental distribution on virtual multichannel providers and demonstrate subscriber growth. In response, management noted a major renewal in early 2019. At current levels, MSGN is trading at a 40% discount to our estimate of private market value.

From John Rogers (Trades, Portfolio)' first-quarter 2019 Ariel Fund shareholder letter.