SBJ/January 18 - 24, 1999/No Topic Name

Partners help Browns loser score big with Skins

Howard Milstein made a $450 million bid and lost in his effort to buy the Cleveland Browns, but his winning $800 million bid to land the Washington Redskins may prove to be the better investment.

Not only does Milstein now have one of the NFL's most coveted and storied franchises, he also has the stadium that grosses the most revenue and a larger market, which should ensure greater revenues from advertisers. And he now has a major partner willing to shoulder a sizable portion of the risk involved in the venture, Daniel Snyder.

The 34-year-old Snyder, chief executive of Bethesda, Md.-based Snyder Communications Inc., was a virtual unknown among the heavy hitting dealmakers vying for the Redskins, but his decision to join forces with Milstein proved to be a winner.

Snyder, who had early notions of pursuing the Redskins on his own, partnered with Milstein and assumed nearly one-third of the $800 million bid. The deal helped push the group's offer to an unprecedented level and lessened Milstein's financial risk, while Snyder's Washington ties provided added incentive to buy the team that has long drawn together politicians of every persuasion.

Adding even more fuel to Milstein's Redskins bid was a knowledge of the buying process that came after being the bridesmaid in the Browns sweepstakes won by banker Al Lerner for $530 million.

"I don't think Howard Milstein really understood the process that the NFL took in the Cleveland deal, and he got caught off guard by that bidding process," said Dean Bonham, president of The Bonham Group Inc., a Denver-based sports franchise consultant. "But with the Redskins, Milstein went in and made sure he got the team."

Milstein wouldn't comment, but Snyder said that joining forces was the only way for either party to win the Redskins.

"We were each going independently, and we knew about each other and it made sense," Snyder said. "We saw each other as the biggest threats to one another, and we knew we'd be a force to be reckoned with."

The group proved formidable enough to soar past any other offers.

Milstein, his younger brother, Edward, and Snyder had originally submitted a $720 million offer with a caveat: The offer would only be good for 24 hours after a round of bids that were due in late December.

Insiders said Milstein's initial approach didn't sit well with the Redskins trustees, who saw Milstein's offer as an effort to circumvent the bidding process that proved so effective in creating a bidding war. The trustees then asked Milstein's group to amend its offer, and the group upped its bid by $80 million later, blowing any competing bids out of contention.

"My feeling is that being a Washingtonian, I wanted to go for it, and I think Howard ended [up] feeling the same way," Snyder said. "The more he understood the Redskins, the more he got excited."

Howard and Edward Milstein will own 60 percent of the Redskins, while Snyder will own 30 percent. The remaining 10 percent will be owned by media mogul Mortimer Zuckerman and former New York City Deputy Mayor John Zucotti.

Proceeds of the Redskins sale, meanwhile, will be put in a foundation for underprivileged children in accordance to the will of late Redskins owner Jack Kent Cooke, who died in April 1997.

While Milstein made an aggressive but unsuccessful run at the expansion Cleveland Browns, he ended up with a more lucrative franchise in the Redskins.

For starters, the Washington market is one-third larger than the Cleveland market, allowing the group to strike higher local media deals. While the Redskins' Jack Kent Cooke Stadium comes with $155 million in debt, it is also the top revenue producer in the NFL, pumping some $52 million in annual operating income into the organization.

The 80,000-seat stadium has 15,044-club seats that sell for $995 to $2,500 per year, while 208 luxury suites ring the field at a cost of $45,000 to $160,000 annually.

The new owners can also milk more operating revenue out of the stadium by selling the facility's naming rights and by increasing signage inside the stadium. In addition, the Milstein group could build additional luxury suites to quicken returns on their massive investment.

"Naming rights can pick up anywhere between $2 million and $4 million annually, and local television is an upside," Bonham said. "But justifying the $800 million price, you throw normal business practices out the window."

A breakdown of the gross $800 million paid by the Milstein group includes the Redskins franchise, Jack Kent Cooke Stadium, approximately $155 million in stadium debt and about $50 million in cash held by the Redskins.

"The Milstein group wrote a check for $800 million and will take control of a corporation that has $50 million in cash," Bonham said. "The trustees have an $800 million check and will pay the $155 million in debt on the stadium."

The Redskins deal was structured as a stock sale to ease the tax burden on the Cooke estate. When Lerner bought the Browns for $530 million, it was an asset-based sale that included $46 million earmarked for the Browns' new stadium.

Besides the Milstein/Snyder group and current Redskins president John Kent Cooke, other Redskins suitors had included Arizona shopping center magnate Sam Grossman, Texas businessman Peter Bonderman and his partner Ted Lerner, and Cablevision Systems Corp. Chairman Charles Dolan, who teamed up with New Jersey Devils owner John McMullen. The sizes of their bids were not disclosed.

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