The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Sebastian Pellejero

NEW YORK, May 28 (Reuters Breakingviews) - The New York Knicks have a chance to win their first championship in 53 years, and in the process help the basketball team's parent company improve its playbook. Madison Square Garden Sports MSGS.N, which also owns the New York Rangers ice hockey squad, has been on a roll, with its stock price reaching a record high after this year's 40% jump. Even now, it's heavily discounted to the estimated value of the two clubs, making a breakup a good call.

The financial scoreboard is decisive. The Knicks are worth $9.9 billion and the Rangers $3.7 billion, sports business site Sportico reckons, after incorporating control and scarcity premiums. The MSG Sports enterprise, part of James Dolan's empire, is valued at about $9.7 billion, including net debt. Investors effectively score a professional hockey franchise for free.

MSG Sports suffers from what Wall Street considers a "Dolan discount," penalized for its hands-on owner whose decisions often hurt the wider shareholding team. The reality is more complicated.

There has been competitive success. The Rangers played deep into the playoffs four times over the past dozen years. Back-to-back conference finals for the Knicks suggest that ceding day-to-day on-court decisions to professional managers, which Dolan did a few years ago, adds value. This year's postseason hoops run could generate as much as $140 million in extra revenue, or a 22% increase, from more games, merchandise and other sources, according to Seaport Research analysts.

The discount is largely a disclosure problem. MSG Sports rents the storied Big Apple arena from Dolan-controlled MSG Entertainment MSGE.N. Both teams also pay for services, such as concessions, and outside investors don't know earnings for either. A shared ticker forces them to value the franchises as a composite, obscuring standalone profitability behind related company arrangements.

Rival valuations are instructive. Baseball's Atlanta Braves Holdings, with its nearby property development, split from cable mogul John Malone's Liberty Media conglomerate and now runs at a modest 7% discount to Sportico's $4.1 billion estimate. Manchester United MANU.N, which also owns Old Trafford stadium, sits further afield. The $2.7 billion UK soccer club has failed to a win an English Premier League title since the 2012-13 season, when its initial public offering took place, and trades 55% below private-market estimates.

MSG Sports assets are performing, but the structure is not. Dolan's proposed Rangers spinoff last week would help narrow the gap, but only with a clean lease and clear team-level earnings. This Knicks playoff run at least gives the owner momentum to pull off a structural slam dunk.

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CONTEXT NEWS

The New York Knicks completed a 4-0 sweep of the Cleveland Cavaliers in the best-of-seven Eastern Conference finals on May 25, securing a place in the National Basketball Association Finals for the first time since 1999.

Club owner Madison Square Garden Sports said on May 18 that it submitted plans to securities regulators for a proposed spinoff of the New York Rangers ice hockey team.