(Reuters) - Madison Square Garden Co, which owns the New York Knicks and New York Rangers, said Monday it is considering a plan to separate its entertainment business from its media and sports business to create two publicly traded companies.
Shares of the company rose 14 percent in after-market trade.
The company said the live entertainment division would be an event and venue management company, while the sports and media unit would run sports teams and regional sports television networks.
"Investors favor companies with greater strategic focus on their core businesses," Chief Executive Officer Tad Smith said in a statement.
Madison Square Garden said its shareholders would own shares in both the new companies if it goes ahead with the spin-off. The company said the idea had been under consideration internally since July.
The company also said its board authorized a plan to buy back Class A shares of up to $500 million.
"We are very pleased that MSG's board of directors and management have committed to pursue a plan to enhance value for all MSG shareholders through the combination of a share repurchase program and contemplated business spin-off...We look forward to the full and timely implementation of these plans," JAT Capital Management LP said in an email to Reuters.
JAT has a 9.36 percent stake in the company as of Sept. 22.
The company said it has not set a timetable for the completion of the potential spin-off.
Madison Square Garden hired LionTree Advisors as financial adviser for the separation.
Madison Square Garden also nominated activist investor Nelson Peltz of Trian Fund management LP and Scott Sperling of private equity firm Thomas H. Lee Partners LP to join its board.
Madison Square Garden shares closed at $65.78 on the Nasdaq on Monday.
(Reporting by Soham Chatterjee in Bangalore and Greg Roumeliotis in New York; Editing by Cynthia Osterman)