Madison Square Garden Entertainment honcho James Dolan is considering selling his controlling stake of the Tao nightclub and restaurant chain.
MSGE retained Goldman Sachs to solicit bids in an auction for the Tao Group, the New York Post reported. The chain operates 32 restaurants and upscale clubs in New York City, along with venues across the globe.
Sources told the outlet Dolan could be looking to close a $600 million gap in his construction project in Las Vegas, MSG Sphere, an entertainment venue with a ballooned $2.2 billion price tag. MSGE borrowed $275 million last month from a JPMorgan-led group of lenders for the project.
Interested parties are already submitting first-round bids for Tao, two people close to the situation told the outlet. One of the company’s reported suitors is Tilman Fertitta, owner of the NBA’s Houston Rockets and the Golden Nugget Casino.
In 2017, MSGE purchased a controlling stake in the business for $181 million. Tao’s founders — Marc Packer, Rich Wolf, Noah Tepperberg and Jason Strauss — retained a minority stake in the business. More recently, Tao purchased upscale restaurant and club chain Hakkasan Group in April 2021 for $99 million.
A Morgan Stanley analyst last month calculated the business was worth $524 million. When subtracting Tao’s $85 million debt, that would put the valuation of MSGE’s controlling stake at $274 million.
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Tao nearly defaulted on its debt in 2019 after a fall in revenue. MSGE loaned the business $49 million at the time when the entertainment chain’s lender JPMorgan declined to roll over its full $100 million loan.
Dolan is said to be looking for a premium well above where the Morgan Stanley analyst placed the company’s value. A source told the outlet several leases for Tao properties are coming up in the next five years, which could affect potential bids for the company.
MSGE declined the Post’s request for comment on the report, citing company policy.
The company last month announced plans to spin off the Madison Square Garden venue — home to the NBA’s New York Knicks and NHL’s New York Rangers — as well as Radio City Music Hall, the Radio City Rockettes and Christmas Spectacular. The publicly traded company is expected to debut this spring.
— Holden Walter-Warner