SBD/March 29, 2012/Franchises

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  • Johnson-Guggenheim Group's $2.15B Deal For Dodgers Will Not Add To Team Debt

    Johnson expected to become public face of new Dodgers ownership group

    The $2.15B sale of the Dodgers to the Magic Johnson-Guggenheim Partners group was a "cash deal that will not add to the team's debt load but could lead to a payoff" of as much as $1B for former Owner Frank McCourt, according to sources cited in a front-page piece by Shaikin & Wharton of the L.A. TIMES. The purchase price includes about $1.6B for the team and about $400M "that will go toward paying off debts incurred by the struggling organization." In addition, the new Dodgers Owner Guggenheim Baseball Management and McCourt will "enter a joint $150-million venture to control the parking lots surrounding the stadium." Sources said that SAC Capital Advisors Founder and Mets investor Steven Cohen along with Lakers investor Dr. Patrick Soon-Shiong offered $1.35B to purchase the Dodgers. The initial bids from Rams Owner Stan Kroenke and the Guggenheim Partners "were about $1.5 billion and $1.6 billion, respectively." When the Guggenheim partnership "kicked its offer to $2 billion, the bidding was abruptly over." Court documents indicated that the team has "piled up $573 million in debts and about $200 million in tax liabilities." With the parking lot venture and McCourt's divorce settlement with ex-wife Jamie figured in, McCourt -- who "bought the team in a highly leveraged deal for $430 million in 2004 -- could clear roughly $1 billion." With Time Warner Cable, Fox and others expected to show interest, experts predict that the Dodgers, whose current TV contract "runs through the 2013 season, could attract as much as $4 billion for their next deal, if the franchise is willing to sign a long-term contract." The team could also "start its own regional sports network -- or leverage the threat to do so in order to drive up the bidding" (L.A. TIMES, 3/29). Meanwhile, in N.Y., Josh Kosman cites sources as saying that the Jackie Robinson Foundation, created by Robinson's widow, Rachel, in '73, "is a partner" in the Dodgers ownership group. Rachel Robinson "will sit on the Dodgers board of directors" (N.Y. POST, 3/29).
     
    SELIG GIVES DEAL HIS BLESSING: MLB Commissioner Bud Selig yesterday gave his blessing to Guggenheim Baseball Management's purchase of the Dodgers. Selig in a statement representing the league's first public comment on the deal called the sale "extraordinarily exciting" and "a profound illustration of the great overall health of our industry." Franchise asset value escalation has been one of the primary measures Selig has encouraged others to use to measure his performance. Selig additionally lavished praise on Johnson, one of the leaders of the Guggenheim group, calling him a "living embodiment of so many of the ideals that are vital to our game and its future." Selig's effusiveness likely goes a long way toward eliminating any potential league-related hiccups as the deal heads toward completion. Though the sales price is well in excess of the general range approved late Tuesday by MLB owners, Selig's comments signaled that the Guggenheim deal structure will still find favor with existing team owners. The U.S. Bankruptcy Court is set to approve the sale April 13, with league approval slated to occur during the month as McCourt is due to close the deal by April 30. Selig in his comments made no specific reference to McCourt but thanked "the great Dodger fans for their loyalty and patience" during the fractious bankruptcy saga (Eric Fisher, SportsBusiness Journal).

    QUESTIONS ABOUT THE PRICE
    : ESPN L.A.'s Arash Markazi noted several sports economists believe that Guggenheim Baseball Management "paid close to twice as much for the team than it is actually worth and question the viability of the deal." Prior to the sale, several economists believed that the Dodgers sale "would surpass the $845 million the Chicago Cubs sold for in 2009, which was the most ever for an MLB team." Most figured that it would "be around the $1.1 billion figure the Miami Dolphins fetched three years ago." Univ. of Michigan sports management professor Mark Rosentraub said, "It's the craziest deal ever; it makes no sense. That's why you saw so many groups drop out. ... It doesn't make business sense. Nobody came up with this number." Markazi noted one of the "biggest reasons the Dodgers sold for $2 billion is the regional sports network battle being waged in market between Fox and Time Warner." The Angels in December agreed to a new deal with Fox worth at least $3B over 20 years, and the Dodgers are "expected to sign a similarly lucrative deal with Fox or Time Warner." Smith College sports economist Andrew Zimbalist said, "One of the things that Selig was trying to avoid when he did not authorize the contract between McCourt and Fox was he thought McCourt would take the money and pocket it instead of using it to build the Dodgers. That indirectly will happen anyway because McCourt is going to get his money and the new ownership will have to use a good chunk of the television money to pay off their asset purchase." Rosentraub said, "If you take the Fox deal or try to start your own network that's going to eat down your capital cost and you've just lost a huge share of revenue" (ESPNLA.com, 3/28). Meanwhile, in N.Y., Madden, Thompson & O'Keeffe cite sources as saying that several MLB owners were "less than thrilled with the purchase" of the Dodgers by Guggenheim Baseball Management. Yankees President Randy Levine yesterday asked a question "that was surely on the minds of many club owners: What does the sale mean for the rest of the league?" Levine said, "It's an incredible price and one can only wonder what the Yankees are worth" (N.Y. DAILY NEWS, 3/29). The N.Y. Daily News' Bruce Murray said, “Just when you think the price of a franchise can't go up, you get staggered with the latest one. I mean, if they’re worth $2 billion, I would think the Yankees are worth $4 billion. The Mets would be worth $3 billion, who knows” ("Daily News Live," SportsNet N.Y., 3/28).

    THE MONEY BEHIND THE BID
    : In L.A., Hamilton & Reckard note Guggenheim Partners "capitalized in recent years on the travails of large investment banks, which were pounded during the 2008 financial crisis by bad investments and even worse public relations." Guggenheim Partners was launched 12 years ago as an investment management firm and since then has "gobbled up a range of properties." It is also a "big player in commercial real estate debt." Guggenheim Partners' "biggest hire" was CEO and new Dodgers controlling Owner Mark Walter, the former CEO of Bear Stearns. Walter said of the group's purchase, "The market drove the price. It's a multi-generational thing my daughters' granddaughters will own." Walters added that he "doesn't feel compelled to recoup the investment immediately." He also "sidestepped questions about the financial merits of the deal." He said that there are "no current plans to develop the land surrounding Dodger Stadium ... though he was coy about the prospects for launching a regional cable TV Network" (L.A. TIMES, 3/29). REUTERS' Sue Zeidler noted Walter "shuttles between New York and Chicago, where he is seen frequently at Cubs games with his young daughter." A source said that Walter "still plans to keep his season tickets for the Cubs, but will soon find a residence" in L.A. (REUTERS, 3/28). Walter said yesterday, "We're very fortunate. We've had success, and that's given me an opportunity to own one of the most storied franchises in America. I hope my daughter and one day my granddaughters will be at Dodgers Opening Day. I just saw it as a once-in-a-lifetime opportunity" (CHICAGO TRIBUNE, 3/29).

    THE MAGIC FACTOR: In L.A., Roger Vincent notes Johnson's "purchase of part ownership of the Dodgers is the latest step in one of the most successful postgame careers of any professional athlete." Former Johnson Development Corp. President Ken Lombard, who mentored Johnson in his transition from basketball to business, said, "He is an extraordinary businessman who has done a great job of executing his strategies." Johnson's strategy has included "immersing himself in the minutiae of real estate development and other business issues while linking up with top players in various industries." Lombard said that it was Dodgers Partner Peter Guber, who also serves as Warriors co-Owner and Mandalay Entertainment Group Chair & CEO, who "greenlighted the development of Magic Johnson Theaters at Baldwin Hills Crenshaw Plaza" in the mid-'90s. Former L.A. Mayor Richard Riordan said that Walter, Guber and Dodgers co-Owner Stan Kasten "made a wise move by joining Johnson in the deal for the Dodgers -- as long as they don't mind his taking the spotlight." Riordan said, "The guy that is putting up all the money has got to have a lot of humility to do it this way because nobody is going to remember his name. They are going to remember Magic Johnson's name" (L.A. TIMES, 3/29). Former Dodgers Owner Peter O'Malley said, "What I really like about Magic's involvement is that Magic is so popular here in Los Angeles. ... He's not going to do anything at all to let down or disappoint the fans. His commitment to living here and working here is important" (L.A. TIMES, 3/29).

    MONUMENTAL MOMENT: ESPN’s Stephen A. Smith said Johnson having an ownership role in the Dodgers is "one of the great moments in history." Smith: "To have someone of African-American descent actually be an owner is a very, very big deal. For a long time it was considered ‘The Clique,’ old boys club, where we never seemed quite invited. ... When you have an owner of Magic Johnson’s magnitude that’s front and center, it talks about and it really highlights how far baseball has come” (“First Take,” ESPN2, 3/28). ESPN's Michael Wilbon said a minority owner like Johnson “represents something that was unthinkable not so many years ago." Wilbon: "There are limited partners and other African-American owners in baseball, but none that have the cache of Magic Johnson” ("PTI," ESPN, 3/28).

    GUBER CONTINUES TO EXPAND PORTFOLIO: In L.A., Steve Zeitchik notes Guber in recent years "has been expanding into sports" via Mandalay Sports Entertainment -- in addition to the Warriors, Guber owns a "host of minor league baseball teams." He will "not have to divest of his minor league teams as a result of a Dodgers deal" (L.A. TIMES, 3/29). But KNBR-AM's Brian Murphy asked, "What the hell is this guy doing buying the Dodgers!?" Murphy: "How can you have a guy trying to make the Warriors better also trying to make the Dodgers better? This is a major Bay Area cognitive dissonance moment.” CSNBayArea.com's Ann Killion noted Guber is exploring building an arena for the Warriors "next door" to the Giants' AT&T Park, "so he’s not going to do anything to piss them off too much, and probably will be on their side when it comes to territorial rights because he wants to share their space with them.” Meanwhile, Killion added that now that the Dodgers are sold, “maybe somewhere that front burner is open now for the A’s” to get their stadium issue resolved" ("Chronicle Live," Comcast SportsNet Bay Area, 3/28).

    UNLIKELY WINNER
    : FORBES' Mike Ozanian wrote if McCourt’s sale of the Dodgers "holds up, he will become the most financially successful owner of a team" in MLB history. Ozanian: "No sale of a baseball team that I have reviewed comes close to yielding as high a return. Even recent deals, enhanced by the increase in value of baseball’s local television rights, have generated returns that are paltry compared with McCourt’s return" (FORBES.com, 3/28). ESPN's Tony Kornheiser said, "Everyone in Los Angeles hates him and they stopped going, and he turns around in a recession and sells it (for $2B)." Kornheiser: “Let me know how such a thing is possible” ("PTI," ESPN, 3/28). ESPN Radio’s Scott Van Pelt, “Does this mean I can buy a team using basically no money down, run it into the ground and then get $2 billion bucks. If so, where do I sign?” ESPN’s Ryen Russillo: “This has to sting for those who go about it the right way.” Russillo said McCourt “walks away a total winner in what seemed like was an inevitable loser situation” (“The Scott Van Pelt Show,” ESPN Radio, 3/28).

    Print | Tags: Los Angeles Dodgers, Franchises
  • Guggenheim Baseball Management Expected To Invest Big In Dodgers' Payroll

    Fans showed up at Dodger Stadium to buy tickets following announcement of deal

    New Dodgers Owner Guggenheim Baseball Management has "plenty of money to both own and operate the Dodgers" after agreeing to pay $2.15B for the team, according to a source cited by Tim Brown of YAHOO SPORTS. After the Basketball HOFer Magic Johnson-led group "fell from the sky" on Tuesday, what followed nationally "was an entirely rational fear Guggenheim Baseball Partners had overextended itself and the Dodgers, sunk by" former Owners Frank and Jamie McCourt over eight years. But reports indicated that Dodgers tickets were "moving well in L.A. as word of Magic’s involvement spread." And the chatter among players was that "Magic was coming, that a baseball man in [co-Owner] Stan Kasten was coming, that an owner with room on his credit cards was coming" (SPORTS.YAHOO.com, 3/28). Johnson said, "The Dodger fans are excited because they get a guy who lives there, who understands the tradition, who wants to bring it back, the winning ways" ("MLB Tonight Live," MLB Network, 3/28). In L.A., Becerra, Landsberg & Esquivel in a front-page piece note yesterday marked a day for "many to be proud of the Dodgers." People arrived at work "wearing their Dodger blue." Others drove to the stadium "ready to start buying tickets again and even some merchandise" (L.A. TIMES, 3/29). Meanwhile, the Dodgers announced yesterday that the club's '12 home opener on April 10 against the Pirates is sold out. The game will also launch the club's season-long celebration of Dodger Stadium's 50th Anniversary (Dodgers).

    BIG BUCKS, NO WHAMMIES: CSNBAYAREA.com's Andrew Baggarly noted the sale is "being heralded in SoCal as the rebirth of one of baseball’s jewel franchises." There is already a "current of thought that the Dodgers will look to make huge splashes in free agency this winter." There is usually "one team every winter that wants to make a huge splash." Baggarly: "Look at the Miami Marlins a few months ago" (CSNBAYAREA.com, 3/28). ESPN.com's Buster Olney wrote, "If you think that an ownership group that just agreed to spend about 2.5 times more than has ever been spent for any baseball team is going to keep the Dodgers' payroll among the row houses of baseball, well, you might also think that Frank McCourt is beloved in Los Angeles." With the investment return for Guggenheim Baseball Management coming "largely through television revenue," there will "never be an offseason in which the Dodgers' biggest acquisitions are No. 4 starters and utility men" under the new owners (ESPN.com, 3/28). In S.F., Henry Schulman cites an agent as saying not only did Giants P Matt Cain "just make more money, but every player did." The agent said, "It really shows how healthy and vibrant the industry is. Plus, every agent knows that the Dodgers are about to spend a lot of money" (S.F. CHRONICLE, 3/29). Dodgers co-Owner Stan Kasten's friends have said that he "believes in paying for stars -- and now he will be in Los Angeles, a town that craves stars." FOXSPORTS.com's Ken Rosenthal wrote Kasten "became frustrated during his tenure as president of the Washington Nationals when ownership declined to spend big." Rosenthal: "Rest assured, the Dodgers will not be bystanders when pitchers such as Cole Hamels and Matt Cain hit the open market next offseason" (FOXSPORTS.com, 3/28). In a Q&A with the L.A. TIMES' Bill Shaikin, Johnson said, "You'll see the team invest money. But Stan will have his plan, and [Dodgers controlling Owner & Guggenheim Partners CEO Mark Walter] and I will support that plan. ... I'm going to be out in the community, selling the team and selling the plan. When Stan sets the plan, we're going to execute it. Mark and I will make sure the business of the Dodgers gets handled" (L.A. TIMES, 3/29).

    WITH POWER COMES GREAT RESPONSIBILITY: In L.A., Bill Plaschke writes as the "initial celebration fades and the close examination begins, Dodgers fans need to see proof that this dream team won't just turn into another nightmare." Johnson said yesterday, "You know I'm going to do this right. I would not be putting millions of my dollars into this if we weren't going to do it right." Plaschke writes, "The questioning started here with Johnson. Will he be more than just a new Dodgers face and voice? Will he have the freedom to help run the Dodgers with his considerable business acumen and competitive spirit?" Johnson confirmed that he has "already picked out a Dodger Stadium office and that, although he still has other business interests, this will be his main job and focus." Plaschke notes in promising to do things the right way, Johnson will "probably be the owner who will answer and explain when they are done wrong" (L.A. TIMES, 3/29). Also in L.A., Helene Elliott writes at “first blush, the group’s agreement to purchase the Dodgers for $2.15 billion is a win-win-win scenario all around.” Fans win because McCourt “goes away for the most part.” The sale price makes this deal “a huge win” for MLB, as it is the “largest price paid for a sports franchise.” But for this to be successful “where it matters most, the new owners must provide resources for the team to succeed on the field.” Finally, the owners “must restore the stability and class the Dodgers once exemplified but lost under their last two owners” (L.A. TIMES, 3/29). MLB Network's Tom Verducci said, “Immediately what they need to do is send a signal that Dodger Stadium is safe and secure for people to bring their families and enjoy a baseball game. That perception has been there, rightly or wrongly, (that) it has not been a welcoming atmosphere” ("Daily News Live," SportsNet N.Y., 3/28). 

    NO LOVE LOST: SI.com’s Lee Jenkins wrote the “best trade in the history of the Dodgers was made Monday night.” Johnson is “an emblem of L.A. in the ‘80s, Showtime at The Forum, Kirk Gibson at Chavez Ravine.” McCourt is an emblem of “America in the ‘00s, wannabes buying what they can’t afford, and waiting for someone to bail them out” (SI.com, 3/28). CBSSPORTS.com’s Ray Ratto wrote under the header, “Face Of The Dodgers? As Long As It’s Not McCourt, It’s All Good” (CBSSPORTS.com, 3/28).

    TAKE BACK THE CITY: In California, Mark Whicker writes, "This story sort of wrecks the Angels' plans for market domination, although the market is certainly big enough for two warring galaxies." It also "changes perception." Anytime a Dodgers fan "had to wait three minutes for a hot dog, owner Frank McCourt got ripped, while the recent ticket fiasco at Angel Stadium was largely excused or ignored." Whicker: "The Teflon that encases [Angels Owner] Arte Moreno doesn't compare with the 32-year-old love affair Johnson and L.A. have shared" (ORANGE COUNTY REGISTER, 3/29).

    Print | Tags: Franchises, Los Angeles Dodgers
  • NFL Owners Excited To See Dodgers Sell For More Than $2B

    Cowboys' value listed at $1.81B, but Jones said real value is decided by market place

    NFL owners were privately "clicking their heels at the news" of the Dodgers being sold for $2.15B, according to sources cited by Len Pasquarelli of THE SPORTS XCHANGE. An AFC team owner said, "This is pretty big for us." NFL Commissioner Roger Goodell called the Dodgers' sale "an extraordinary price. ... I really don't have anything beyond that." Several NFL owners "suggested over the past few days that a return" to L.A. is "not imminent." However, the "trickle-down effect of the Dodgers' sale ... will not be ignored by NFL owners." SportsCorp President Marc Ganis said, "It definitely raises the bar." He added, "There a lot of (NFL) owners smiling today, and rightly so" (THE SPORTS XCHANGE, 3/28). ESPN’s Adam Schefter reported NFL owners were "very happy to hear that the Dodgers went for $2 billion." Chavez Ravine is a site in which the NFL "always has looked at as highly desirable, and if somehow Magic Johnson and his group of investors can figure out a way to work that land and somehow create space for an NFL stadium, that would enhance the chances of an NFL team going back to L.A." ("SportsCenter," ESPN, 3/28). In Dallas, David Moore notes the Cowboys "sit atop the Forbes list as the most valuable North American sports franchise" at $1.81B. If Owner Jerry Jones wanted to sell the team, the sale of the Dodgers for $2B "just sent his asking price through the Cowboys Stadium roof." Jones said, "It's impressive. It's very impressive.'' He added, "Evaluations are estimates of value. The real value is when you see the market place decide what they're worth, and that's the value. Period" (DALLAS MORNING NEWS, 3/29). In L.A., Sam Farmer notes some NFL owners called the Dodgers sale a "reminder of how valuable" the L.A. market could be. Jones said, "I think it reflects the value ... of being involved in the sports business in L.A." Giants Chair & Exec VP Steve Tisch said the sale is "going to draw a lot of attention to L.A. as a super-valuable market for sports teams." Tisch added, "It kind of raises the bar for all of us. When a baseball club sells for over $2 billion when you fold in the real estate, it makes all of us stand up and say, 'Wow!'" (L.A. TIMES, 3/29).

    WIN FOR THE LEAGUES: In St. Louis, Bernie Miklasz writes Rams Owner Stan Kroenke's failure to land the Dodgers was a "win for the NFL." Miklasz: "I don't think the NFL wanted Kroenke further distracted by adding yet another toy to his collection of sports franchises." MLB "wasn't enthusiastic about handing a crown-jewel franchise to a largely absentee owner who has so many other teams and business interests." Moreover, MLB "probably didn't want the Dodgers and Chavez Ravine to be in the middle of Kroenke's potential maneuvering for an NFL franchise" in L.A. (ST. LOUIS POST-DISPATCH, 3/29).

    Print | Tags: Franchises, Los Angeles Dodgers, NFL, MLB
  • Franchise Notes

    In L.A., T.J. Simers writes under the header, “Jim Buss Is Proving Doubters Wrong With The Lakers.” Simers writes the son of Lakers Owner Jerry Buss “got it right.” As Lakers Exec VP/Player Personnel, he “found a way to improve the team at point guard,” and that is what fans wanted. Simers: "It doesn’t appear the Lakers are in the hands of a complete loser, as so many of you have called Jim Buss in the last few months” (L.A. TIMES, 3/29).

    RIGHT MAN FOR THE JOB: In Philadelphia, Paul Domowitch wrote all things considered, Eagles GM Howie Roseman “has done a very good job of helping rebuild an Eagles team that has just five starters left from the '08 team that made it to the NFC Championship Game.” Eagles President Joe Banner said of Roseman, "He understands the (salary) cap and the role it plays in building a team probably better than any GM in the league. We're all very confident about where he's headed." Domowitch noted that while coach Andy Reid “still has final say over all personnel issues and Banner still is the team's primary cap strategist, Roseman clearly has taken on a bigger organizational profile in recent months” (PHILADELPHIA DAILY NEWS, 3/28).

    FULL HOUSE: In Portland, Geoffrey Arnold wrote the MLS Sounders “will open the entire stadium for seating when they host the Timbers Oct. 7” at CenturyLink Field. What the change “means is the Timbers will probably find themselves in the middle of more than 66,000 predominately Seattle fans.” The team will “open the entire stadium for home games against” the Timbers, Whitecaps and Galaxy, as well as for an exhibition against EPL club Chelsea. Arnold wrote there is “little doubt the Sounders will sell out for the game against the Timbers” (OREGONLIVE.com, 3/27).

    PLEADING WITH THE PUBLIC
    : The GLOBE & MAIL’s David Ebner writes the Canucks’ newest campaign titled “This is Our Home” is the “latest push in its year-long call to fans to ‘celebrate responsibly.’” The commercials “star famous Canucks old and new (from Trevor Linden to Henrik Sedin), as well as fans, and places them amid iconic locations in the Vancouver region, trying to evoke a sense of pride and responsibility” (GLOBE & MAIL, 3/29).

    Print | Tags: Franchises
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