Item 1.01. Entry into a Material Definitive Agreement.
Merger Agreement
On March 25, 2021, Madison Square Garden Entertainment Corp., a Delaware
corporation ("MSG Entertainment"), MSG Networks Inc., a Delaware corporation
("MSG Networks"), and Broadway Sub Inc., a Delaware corporation and a direct
wholly-owned subsidiary of MSG Entertainment ("Merger Sub"), entered into an
Agreement and Plan of Merger (the "Merger Agreement"). The board of directors of
MSG Entertainment ("MSGE Board") approved, adopted and declared advisable the
Merger Agreement upon the recommendation of a special committee of independent
directors of the MSGE Board ("MSGE Special Committee").
The Merger.
The Merger Agreement provides that, upon the terms and subject to the conditions
set forth in the Merger Agreement, Merger Sub will merge with and into MSG
Networks (the "Merger"), with MSG Networks surviving the Merger as a
wholly-owned direct subsidiary of MSG Entertainment. Subject to the terms and
conditions of the Merger Agreement, at the time at which the Merger becomes
effective (the "Effective Time"), each holder of record of a share of Class A
common stock, par value $0.01 per share, of MSG Networks ("MSGN Class A Common
Stock") issued and outstanding immediately prior to the Effective Time, other
than certain excluded shares, will be converted into the right to receive a
number of shares of Class A common stock, par value $0.01 per share, of MSG
Entertainment ("MSGE Class A Common Stock") equal to such number of shares of
MSGN Class A Common Stock held immediately prior to the Effective Time
multiplied by 0.172, with such number rounded up to the next whole share (such
number of shares of MSGE Class A Common Stock, the "Class A Merger
Consideration"), and each holder of record of a share of Class B common stock,
par value $0.01 per share, of MSG Networks ("MSGN Class B Common Stock" and,
together with MSGN Class A Common Stock, the "MSGN Common Stock") issued and
outstanding immediately prior to the Effective Time, other than certain excluded
shares, will be converted into the right to receive a number of shares of
Class B common stock, par value $0.01 per share, of MSG Entertainment ("MSGE
Class B Common Stock" and, together with the MSGE Class A Common Stock, the
"MSGE Common Stock") equal to such number of shares of MSGN Class B Common Stock
held immediately prior to the Effective Time multiplied by 0.172, with such
number rounded up to the next whole share (such number of shares of MSGE Class B
Common Stock, the "Class B Merger Consideration").
Conditions to the Merger.
The consummation of the Merger is subject to certain conditions, including:
(i) adoption of the Merger Agreement by the holders of a majority of the voting
power of the outstanding MSGN Common Stock, voting together as a single class;
(ii) approval of the issuance by MSG Entertainment of the MSGE Common Stock to
be issued in connection with the Merger (the "Share Issuance") by (a) the
holders of a majority of the total votes of the shares of MSGE Common Stock cast
on the matter and (b), with respect to the issuance of shares of MSGE Class B
Common Stock in the Share Issuance as Class B Merger Consideration, the holders
of not less than 66 2/3% of the voting power of the outstanding shares of MSGE
Class B Common Stock, voting separately as a class; (iii) the listing on the New
York Stock Exchange of the MSGE Class A Common Stock issuable as Class A Merger
Consideration; (iv) receipt of certain governmental and other approvals,
including the expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; (v) the
absence of any law or order prohibiting the consummation of the Merger; (vi) the
effectiveness of the registration statement on Form S-4 to register the MSGE
Class A Common Stock to be issued as Class A Merger Consideration in the Merger;
(vii) the accuracy of the representation and warranties of the parties (subject
to customary materiality qualifiers); (viii) each party's performance in all
material respects of its obligations contained in the Merger Agreement; (ix) the
absence of any material adverse effect (as defined in the Merger Agreement) on
MSG Entertainment or MSG Networks since the date of the Merger Agreement; and
(x) the receipt by each party from the other party of a required tax
representation letter to the extent required by the Merger Agreement.
Termination Rights.
The Merger Agreement contains certain customary termination rights for MSG
Entertainment and MSG Networks, including, without limitation, if the Merger is
not consummated on or before December 20, 2021 (the "Outside Date"). Upon the
termination of the Merger Agreement under specified circumstances, including
(i) a change in the recommendation of the MSGE Board (or the MSGE Special
Committee) or the board of directors (or special
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committee of the board of directors) of MSG Networks or (ii) the termination by
MSG Entertainment or MSG Networks in order to accept a superior proposal (as
defined in the Merger Agreement) with respect to an alternative transaction, MSG
Networks will be required to pay MSG Entertainment a termination fee of
$18,900,000 or MSG Entertainment will be required to pay MSG Networks a
termination fee of $21,200,000, respectively.
Representations, Warranties and Covenants.
MSG Entertainment, MSG Networks and Merger Sub have each made customary
representations, warranties and covenants in the Merger Agreement, including
covenants not to solicit alternative transactions and, subject to certain
exceptions, not to participate in discussions or negotiations regarding, or
furnish non-public information in connection with, a proposal or offer with
respect to an alternative transaction. Until the Effective Time, each of MSG
Entertainment, MSG Networks and Merger Sub has agreed to operate its business in
the ordinary course of business consistent with past practice in all material
respects, subject to certain exceptions including in respect of COVID-19
measures and has agreed to certain other restrictive covenants.
The Merger Agreement also provides that, upon the closing of the Merger, a
current director of MSG Networks elected by the holders of MSGN Class A Common
Stock, to be designated by the MSGN Board, will be appointed as a director of
MSG Entertainment elected by holders of MSGE Class A Common Stock. Such
individual will be nominated for election to the MSGE Board as a director to be
elected by holders of MSGE Class A Common Stock upon the expiration of his or
her initial term of office.
The Merger Agreement and the above description of the Merger Agreement have been
included to provide investors with information regarding the terms of the Merger
Agreement. It is not intended to provide any other factual information about MSG
Entertainment, MSG Networks or their respective subsidiaries or affiliates. The
representations, warranties and covenants contained in the Merger Agreement were
made only for purposes of that agreement and as of specific dates, were solely
for the benefit of the parties to the Merger Agreement and may be subject to
limitations agreed upon by the parties in connection with negotiating the terms
of the Merger Agreement, including being qualified by confidential disclosures
made by each party to the other for the purposes of allocating contractual risk
between them. In addition, certain representations and warranties may be subject
to a contractual standard of materiality different from those generally
applicable to investors and may have been used for the purpose of allocating
risk between the parties rather than establishing matters as facts. Information
concerning the subject matter of the representations, warranties and covenants
may change after the date of the Merger Agreement, which subsequent information
may or may not be fully reflected in public disclosures by MSG Entertainment or
MSG Networks. The Merger Agreement should not be read alone, but should instead
be read in conjunction with the other information regarding the parties that is
or will be contained in, or incorporated by reference into, the Forms 10-K and
Forms 10-Q filed and to be filed by MSG Entertainment or MSG Networks, the Form
S-4 containing a joint proxy statement/prospectus to be filed by MSG
Entertainment and MSG Networks in connection with the Merger, and other
documents that the parties file with the Securities and Exchange Commission
("SEC"). Investors should not rely on the representations, warranties and
covenants or any description thereof as characterizations of the actual state of
facts or condition of MSG Entertainment, MSG Networks or any of their respective
subsidiaries, affiliates or businesses.
The foregoing description of the Merger Agreement and the transactions
contemplated thereby does not purport to be complete and is subject to, and
qualified in its entirety by, the full text of the Merger Agreement, a copy of
which is attached hereto as Exhibit 2.1 and incorporated herein by reference.
Voting Agreements
On March 25, 2021, MSG Entertainment and the holders of all outstanding shares
of MSGN Class B Common Stock (the "Principal MSGN Stockholders") entered into a
voting agreement (the "MSGN Voting Agreement"), to which MSG Networks is an
intended third party beneficiary, pursuant to which the Principal MSGN
Stockholders agreed, among other things and subject to the terms and conditions
set forth in the MSGN Voting Agreement, to vote their shares of MSGN Common
Stock in favor of the adoption of the Merger Agreement. In addition, MSG
Networks and the holders of all outstanding shares of MSGE Class B Common Stock
(the "Principal MSGE Stockholders") entered into a voting agreement (the "MSGE
Voting Agreement"), to which MSG Entertainment is an intended third party
beneficiary, pursuant to which the Principal MSGE Stockholders agreed to vote
their shares of MSGE Common Stock in favor of the approval of the Share
Issuance.
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The foregoing descriptions of the MSGN Voting Agreement and MSGE Voting
Agreement do not purport to be complete and are subject to, and qualified in
their entirety by, the full texts of the MSGN Voting Agreement and MSGE Voting
Agreement, copies of which are attached hereto as Exhibit 10.1 and Exhibit 10.2,
respectively, and incorporated herein by reference.
Additional Information and Where to Find It
This document may be deemed to be solicitation material in respect of the
proposed transaction between MSG Entertainment and MSG Networks. In connection
with the proposed transaction, MSG Entertainment and MSG Networks intend to file
with the SEC a registration statement on Form S-4 that will include a joint
proxy statement of MSG Entertainment and MSG Networks that also constitutes a
prospectus of MSG Entertainment. MSG Entertainment and MSG Networks may also
file other documents with the SEC regarding the proposed transaction. This
document is not a substitute for the joint proxy statement/prospectus, Form S-4
or any other document which MSG Entertainment or MSG Networks may file with the
SEC. INVESTORS AND SECURITY HOLDERS OF MSG ENTERTAINMENT AND MSG NETWORKS ARE
URGED TO READ THE REGISTRATION STATEMENT, THE JOINT PROXY STATEMENT/PROSPECTUS
AND ALL OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC,
AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN
THEIR ENTIRETY BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT
THE PROPOSED TRANSACTION. Investors and security holders may obtain free copies
of the Form S-4 and the joint proxy statement/prospectus (when available) and
other documents filed with the SEC by MSG Entertainment and MSG Networks from
the SEC's website at www.sec.gov. Copies of documents filed with the SEC by MSG
Entertainment will be made available free of charge on MSG Entertainment's
investor relations website at http://investor.msgentertainment.com. Copies of
documents filed with the SEC by MSG Networks will be made available free of
charge on MSG Networks' investor relations website at
http://investor.msgnetworks.com.
No Offer or Solicitation
This document is for informational purposes only and is not intended to and does
not constitute an offer to sell, or the solicitation of an offer to subscribe
for or buy, or a solicitation of any vote or approval in any jurisdiction, nor
shall there be any sale, issuance or transfer of securities in any jurisdiction
in which such offer, sale or solicitation would be unlawful, prior to
registration or qualification under the securities laws of any such
jurisdiction. No offer of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities Act of 1933,
as amended, and otherwise in accordance with applicable law.
Participants in the Solicitation
MSG Entertainment, MSG Networks and certain of their respective directors and
executive officers may be deemed to be participants in the solicitation of
proxies from the holders of MSG Entertainment and MSG Networks securities in
respect of the proposed transaction under the rules of the SEC. Certain
information regarding these directors and executive officers and a description
of their direct and indirect interests, by security holdings or otherwise, will
be included in the Form S-4 and joint proxy statement/prospectus regarding the
proposed transaction (when available) and other relevant materials to be filed
with the SEC by MSG Entertainment and MSG Networks. Information regarding MSG
Entertainment's directors and executive officers is available in MSG
Entertainment's proxy statement relating to its 2020 annual meeting of
stockholders filed with the SEC on October 27, 2020. Information regarding MSG
Networks' directors and executive officers is available in MSG Networks' proxy
statement relating to its 2020 annual meeting of stockholders filed with the SEC
on October 21, 2020. These documents will be available free of charge from the
sources indicated above.
Forward-Looking Statements
This document contains statements that may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995, as
amended. Some of these forward-looking statements can be identified by the use
of forward-looking words such as "believes," "expects," "may," "will," "should,"
"seeks," "approximately," "intends," "plans," "estimates," "projects,"
"strategy," or "anticipates," or the negative of those words or other comparable
. . .
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Description of Exhibit
2.1 Agreement and Plan of Merger, dated as of March 25, 2021,
by and among MSG Entertainment, MSG Networks and Merger
Sub.*
10.1 MSG Networks Voting and Support Agreement, dated as of
March 25, 2021, by and among MSG Entertainment and certain
stockholders of MSG Networks that are signatories thereto.
10.2 MSG Entertainment Voting and Support Agreement, dated as
of March 25, 2021, by and among MSG Networks and certain
stockholders of MSG Entertainment that are signatories
thereto.
104 Cover Page Interactive Data File (embedded within the Inline
XBRL document).
* Pursuant to Item 601(a)(5) of Regulation S-K, certain exhibits and schedules
have been omitted. The registrant hereby agrees to furnish supplementally a
copy of any omitted exhibit or schedule to the SEC upon request.
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