Cablevision Systems Corp said on Thursday its board approved a spinoff of its Madison Square Garden (MSG) unit by year-end, in hopes of a better valuation from Wall Street for assets such as its New York Knicks basketball team and Radio City Music Hall.

Shares climbed 9 percent as investors bet the tax-free spinoff may be the first move by Cablevision to break up the company, which also includes the Rainbow Networks group of cable networks like AMC and WE.

Collins Stewart analyst Thomas Eagan said the MSG unit will be worth more apart from Cablevision. The timing is good because the two recent sales of the Chicago Cubs and Montreal Canadiens, imply that the Knicks and the (New York) Rangers alone are worth $1.4 billion by our estimates, he said.

The real value of MSG could be worth an extra $3 per Cablevision share, Eagan said.

Under the new structure, the company's controlling family, the Dolans, would also own a controlling stake in MSG, which also owns the namesake arena and New York Rangers hockey team.

James Dolan will become executive chairman of the new public Madison Square Garden and continue as chief executive of Cablevision.

Hank Ratner will be president and CEO of MSG and remain vice chairman of Cablevision.

Cablevision founder Charles Dolan will continue as Cablevision chairman.

The company first said it was exploring the MSG spinoff three months ago.

Its shares were up $1.69 to $20.62 in early trading on the New York Stock Exchange.

Separately, Cablevision said second-quarter net profit declined to $87 million, or 29 cents a share, from $94.7 million, or 32 cents a share. Revenue rose nearly 10 percent to $1.88 billion.

Cablevision lost 8,700 basic video subscribers during the quarter but added 56,000 digital subscribers.

Analysts at Collins Stewart had forecast addition of 2,000 basic subscribers and 61,000 digital video subscribers.

The company also added 17,900 high speed Internet and 37,600 digital phone subscribers.

Collins Stewart expected 29,000 high speed Internet subscribers and 60,000 phone subscribers.

(Reporting by Yinka Adegoke; editing by Jeffrey Benkoe and Derek Caney)

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