MSG’s Dolan Inks Pact With Goldman Sachs To Explore Tao Sale

New York billionaire James Dolan has quietly moved to auction off the upscale Tao Group’s nightclub and restaurant chain, sources said. 

The New York mogul’s Madison Square Garden Entertainment — the conglomerate that owns not only the landmark home to the New York Knicks and Rangers, but also Radio City Music Hall and the Rockettes, among other properties has hired Goldman Sachs to explore a sale of Tao Group, sources close to the situation said.

First-round bids for Tao  whose pricey clubs have long been playgrounds for Wall Street financiers and A-List celebrities are being submitted now. Houston Rockets and Golden Nugget Casino owner Tilman Fertitta is a rumored suitor for Tao. The Texan’s restaurant portfolio includes Mastro’s, Vic & Anthony’s Steakhouse, Willie G’s Seafood, the Palm Restaurant, Saltgrass Steakhouse, Grotto, the Bubba Gump Shrimp Co., and Brenner’s Steakhouse.

Last month, a Morgan Stanley analyst calculated that Tao which operates 32 New York City restaurants and clubs like Beauty & Essex, Lavo and Bar Moxy, as well as dozens of other venues in hotspots like London, Singapore and Dubai was worth $524 million.

By that estimate, MSGE’s 67% stake in Tao would be worth $274 million, when subtracting Tao’s $85 million in debt. Insiders say that’s a sum that could help Dolan close a $600 million gap in the construction budget for the MSG Sphere, a state-of-the-art entertainment venue he’s building in Las Vegas whose price tag has nearly doubled to $2.2 billion.

Nevertheless, insiders say Dolan wants a premium price well above Morgan Stanley’s valuation as Tao expands beyond its New York City and Las Vegas base to the Middle East and Miami.

“Jim is looking at a 12 times Ebitda multiple,” a source with close knowledge of the sale said, which would be nearly $800 million. “It’s probably worth seven to eight.” “Lots of rents on Tao properties are up in the next five years,” the source added, explaining why the multiple should be in the single digits. “You also have to continually reinvest.”

In 2017, Madison Square Garden had acquired its controlling stake in Tao for $181 million, with Tao founders Marc Packer, Rich Wolf, Noah Tepperberg and Jason Strauss retaining a minority stake in the business. Tao has lately recovered from business woes that started even before the pandemic. The company was at risk of defaulting on its debt in 2019 after its revenue fell in half. MSG came in and loaned Tao $49 million after Tao lender JPMorgan refused to roll over its full $100 million loan, sources said.

Tao has continued to grow in 2022.  Last year, Tao Group paid $99 million to acquire Hakkasan Group — a global chain of upscale restaurants and clubs with outposts in London, Las Vegas the Middle East and Asia. The company recently announced plans to open its first ever TAO-branded resort in Orlando, FL. completing the company’s 360-degree approach to full-service entertainment experiences. Created in partnership with Unicorp National Developments, TAO Hotel will serve as the anchor for O-Town West – a $1 billion, 350-acre mixed-use community development located in stunning Southwest Orange County. Longtime partner Rockwell Group will design the property, which will flawlessly embody the upscale nature of all Tao Group Hospitality branded locations. The luxury hotel will encompass a TAO Asian Bistro, rooftop experience, meeting space, fitness facility. 

For more than 20 years, Tao Group Hospitality has been a leader and innovator in the entertainment and culinary industry operating more than 70 branded locations in over 20 markets worldwide. Tao Group Hospitality has experienced rapid growth in recent years, expecting to open nine branded locations in 2022 with at least ten more planned in 2023.

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