Madison Square Garden Co. is exploring splitting into two publicly traded companies to unlock value in the New York Knicks and New York Rangers sports franchises and buoy its entertainment business.

MSG, controlled by the Dolan family, has been considering since July a plan to house its sports teams and cable networks in one company and move its real estate assets and its concert and entertainment business into another, according to a statement yesterday.

Nelson Peltz, the co-founder of Trian Fund Management LP, and Scott Sperling, co-president of private-equity firm Thomas H. Lee Partners LP, will be nominated to the board and MSG will buyback as much as $500 million in Class A shares.

The $2 billion purchase of the Los Angeles Clippers by former Microsoft Corp. Chief Executive Officer Steve Ballmer -- almost four times the previous record paid for an NBA team -- was one catalyst for the board’s decision, people familiar with the situation said. Mario Gabelli, whose family of funds own more than 7 percent of MSG’s outstanding shares, said in May that a buyer would get the Knicks for free, given the Clippers valuation.

The Dolan family owns about 69 percent of MSG’s voting shares.

“Investors favor companies with greater strategic focus on their core businesses,” Tad Smith, MSG’s CEO, said in yesterday’s statement.

MSG rose 10.6 percent to $72.75 a share as of 9:31 a.m. in New York trading, giving the company a market value of about $5.6 billion. The Knicks may be “intrinsically worth” as much as 50 percent more than the Clippers, bringing the value of MSG’s assets to about $6 billion, Albert Fried & Co. estimated in May.

John A. Thaler’s JAT Capital Management LP, which disclosed a stake in MSG in August and has since pushed its holding to more than 9 percent of shares outstanding -- pressed the board to evaluate ways to improve shareholder value, in part leading to MSG’s decision, according to a person with knowledge of the situation.

“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,” the fund said in an e-mailed statement.

Peltz’s Trian doesn’t own a stake in MSG, according to a person familiar with the situation who asked not to be identified discussing private information. A representative for Peltz declined to comment.

Three Divisions

MSG is currently run as three divisions. MSG Sports owns and operates the National Basketball Association’s Knicks, the National Hockey League’s Rangers, the Women’s National Basketball Association’s New York Liberty and the American Hockey League’s Hartford Wolf Pack.

Under the plan being considered, that would be combined with MSG Media, which consists of the company’s regional sports networks that appear in most expanded basic pay-TV packages throughout the New York area.

A separate company would include MSG Entertainment, which produces and hosts concerts and shows at MSG’s real estate venues, comprising Madison Square Garden Arena, Radio City Music Hall, the Beacon Theatre, the Chicago Theatre and the Forum in Inglewood, California.

LionTree Advisors LLC is serving as MSG’s financial adviser for the spinoff.

Before the Clippers purchase, the most paid for an NBA team was $550 million for the Milwaukee Bucks. That franchise was sold this year to Avenue Capital’s Marc Lasry and Fortress Investment Group co-founder Wes Edens.

NBA teams are seeing their value rise as TV deals boost revenue. Under an agreement reached earlier this month, starting in 2016 Walt Disney Co. and Time Warner Inc. will pay the NBA almost three times as much to air games as under the last contract.

The media and sports company may also become an eventual target for larger companies, which have been looking to consolidate as pay-TV distributors add scale. Comcast Corp.’s deal for Time Warner Cable Inc. and AT&T Inc.’s acquisition of DirecTV are the two largest U.S.-based mergers and acquisitions this year, totaling more than $130 billion including debt.

A newly created real estate and entertainment company could qualify as a real estate investment trust, according to one of the people familiar with the matter. The real estate itself could be a target, said John Tinker, a New York-based analyst at Maxim Group LLC.

“You don’t need for instance the team to own the stadium, so if private-equity comes in there you could easily do a sale- leaseback,” he said in a phone interview last week.

A coalition of New York civic leaders last week released a report arguing that MSG’s namesake arena should be moved three blocks to allow for the expansion of Pennsylvania Station. MSG has nine more years on its current lease after last year completing a three-year, $1 billion renovation of the building.

Company boards are increasingly turning to spinoffs as a way to boost returns for investors - betting that the separate pieces will fetch a higher valuation in the stock market.

A record 76 spinoffs -- by companies from EBay Inc. to International Paper Co. -- have been announced in the U.S. this year, data compiled by Bloomberg show.

Cablevision Systems Corp. spun off MSG in February 2010, 16 years after it and ITT Corp. acquired it from Viacom Corp. for $1.08 billion. James Dolan, the CEO of Cablevision and son of the company’s founder, Charles Dolan, is MSG’s chairman and the owner of the Knicks and Rangers.

JAT Capital, based in Greenwich, Connecticut, uses a long- short strategy that seeks to profit by betting on rising and falling stocks, and is focused on technology, media, telecommunications, travel and leisure companies.

Trian, founded by Peltz with partners Peter May and Ed Garden in 2005, manages about $10 billion. Self-described “constructivists,” Trian buys stakes in public companies they regard as under-performers and seek to work with management and boards to boost shareholder returns.

--With assistance from Beth Jinks, Doni Bloomfield and Brooke Sutherland in New York.