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SBJ/September 24-30, 2012/FranchisesPrint All
The reclusive, enigmatic 72-year-old billionaire, who built one of the most powerful sports and entertainment companies in the world, saw the $2.15 billion that Guggenheim Partners paid for the Los Angeles Dodgers in March and set in motion a series of steps that led to last week’s announcement that AEG was for sale.
The news was stunning to some, but former AEG executives said it had been in the works over the past five years. AEG President and CEO Tim Leiweke said Anschutz had received offers in the past and told those suitors he would get back to them when the time was right.
L.A. Live and Staples Center in downtown Los Angeles are already drawing attention from developers who would like to see AEG break up its assets.
Photo by:GETTY IMAGES
Seeing the Dodgers’ sale price, as well as the value of other teams in Los Angeles, “this is a pretty good time to be out there looking at a deal like this,” Leiweke said.
Anschutz always expected a return on his investment and this deal will easily produce one of the richest deals in the history of sports, a multibillion-dollar transaction that some have estimated could hit $8 billion.
Blackstone Group was hired to broker the transaction, but it’s Leiweke, who signed a five-year contract extension about a week ago to remain in charge of AEG at its corporate headquarters in Los Angeles, who will lead the effort to sell the company on behalf of Anschutz.
“My task is to make sure we make people aware of AEG and the value of this company and our vision in particular,” Leiweke said. “I’ve been here for 20 years, this has always been my baby and nothing is going to change. I am still going to be here day to day, and our management team is going to be here day to day.”
It’s obvious that Leiweke feels there is major room for growth at AEG.
“This is not an outright disposition of its assets and the company ceases to exist,” he said. “Exactly the opposite. AEG is a very vibrant, multibillion-dollar company and we are going to have a new investor.”
Richard Schaefer, CEO of Golden Boy Promotions, a boxing promotions company in which AEG owns a 20 percent stake, agrees.
“I really don’t see any significant change,” he said. “I believe that whoever is going to acquire AEG is either going to be an individual who is passionate about sports and entertainment or a private equity firm that is passionate about returns.”
News of the sale surprised many, and even the most accessible quickly refused comment on Anschutz or a possible deal. But talk among industry executives was about the timing of the announcement and who could possibly acquire such a large and diverse portfolio of companies.
Phil Anschutz reflected on his business after winning a title with the L.A. Kings this year.
Photo by:AP IMAGES
The Los Angeles Kings, which Anschutz bought with co-owner Ed Roski in 1995, won their first Stanley Cup in June. For many years the Kings struggled under their stewardship, but winning the Cup finally satisfied Anschutz’s hunger for a championship in pro hockey, prompting the team owner to reflect on his accomplishments in sports business.
“I think he looked around and felt like we achieved everything we set out to do,” Leiweke said.
Internally, the development of Farmers Field, the NFL stadium AEG proposes to build in downtown Los Angeles, is a primary driver behind Anschutz’s decision, Leiweke said. This week, AEG is expected to sign a deal with the city of Los Angeles for AEG to finance stadium construction and sign a long-term lease to run the facility. As a result, Anschutz “obviously knows we would be better off to have the new owner before we start building, not after we start building,” Leiweke said. “I think this transaction was meant in large part to help put that on a fast track.”
The biggest question remains whether Anschutz will be able to fulfill his hope of selling AEG whole — with all of its assets kept intact under a new owner. Many question whether that can be achieved, but Leiweke was steadfast last week that AEG will be sold only as one entity.
Leiweke would not put a value on the company, but various outlets reported a figure between $6 billion and $8 billion for the entire company.
Besides the Kings, AEG owns four arenas outright, including Staples Center, one of North America’s most profitable facilities, as well as Major League Soccer’s Los Angeles Galaxy. AEG also owns 30 percent of the Lakers.
“I’ve seen a lot of numbers too,” Leiweke said. “I saw one that was $1.8 billion and I kind of laughed and said, ‘Well, that’s Staples Center, what about the rest of it? And then I saw a number that was $15 billion. Obviously we don’t think it’s [worth] $15 billion.”
He said, “It’s worth what someone is willing to pay for it, but I believe that if you look at it, are the Lakers worth as much as the Dodgers? Arguably, yes. Are the Kings now one of the more valuable teams in the NHL? They’re the Stanley Cup champs, so arguably, yes. This is going to be one of the larger deals done in the history of sports and entertainment, and a large part of that is our real estate and our entertainment districts. That’s really where our value is.”
Considering AEG owns teams, arenas, events, ticketing and merchandise companies, plus AEG Live, North America’s second-largest concert promoter behind Live Nation, the sales process would appear to be a potentially lengthy one. But Leiweke believes the timing will be swift.
“Mr. Anschutz has said he expects it will take until the end of the first quarter,” Leiweke said. “My guess is it will be less because we are not a very complicated company. There are not a lot of contingencies, not a lot of approvals. Phil owns almost everything 100 percent, and where we do have partnerships, like the Lakers, it’s a pretty well laid out process.”
There will be the thorough league vetting that would go with any sale, but Leiweke dismissed that as “an issue when we’re talking about the magnitude and the people who can afford to do this deal.”
Photo by:NBAE / GETTY IMAGES
Immediate speculation focused on a few names, with Lakers investor Patrick Soon-Shiong the most frequent name brought up. Soon-Shiong confirmed his interest in a public statement last week, and he is known to be close to Leiweke.
Other entities floated included Guggenheim Partners, Oracle’s Larry Ellison and even Cablevision, to tie it into its Madison Square Garden assets. MSG owns the Knicks and Rangers, though, and with the NBA and NHL restricting ownership to one team, the
Billionaire Patrick Soon-Shiong (top photo) is among the interested parties. Leiweke (above) says a sale could move quickly.
Photo by:GETTY IMAGES
Sources in the banking world believe that AEG’s new owner will come from the financial sector and that an overseas buyer is highly likely.
“All the big private equity funds will be in there,” said Rob Tilliss, founder and head of Inner Circle Sports, a small sports investment banking firm.
The buyer could be someone from the Middle East, “where the wealth is just staggering. … That’s what Anschutz is hoping for,” said Cliff Kaplan, president of Van Wagner Sports.
Sports consultant Andy Dolich pointed to Mexico telecom tycoon Carlos Slim, who with a net worth of $69 billion is the world’s richest man, as a potential buyer. His family has interests in Formula One motorsports.
But even if a single buyer is found, some speculate they could enter into partnerships with facility management firms such as SMG and Comcast-Spectacor and sell a stake in AEG Facilities, a division tied to ownership, operations and marketing of about 100 buildings worldwide. The same could hold true for Axs, AEG’s ticketing brand, and AEG Merchandising, its retail vendor.
“All of our parts are linked … and I don’t think you can disconnect them,” Leiweke said. “Quite frankly, each of our assets, when combined, becomes more valuable than when the assets stand alone.”
Whether potential buyers agree with Anschutz and Leiweke remains to be seen, and industry reaction was mixed over whether it would be more profitable to sell the company as one or break it into several chunks.
Two former AEG executives, one on the facilities side and one on the team side, agreed with Leiweke that AEG’s true value lies in the company as a whole. “Each entity working together gives it the power it has,” the facilities source said.
But a source who used to work for AEG Facilities believes that it would be almost impossible to find one buyer for a company with a presence across multiple platforms in sports and entertainment.
“If you were to just try and buy one piece, the value of Staples Center itself would be off the charts,” the source said.
Michael Rowe, president and CEO of Positive Impact, a sports marketing firm, and former co-owner of the New Jersey Nets and ex-manager of old Giants Stadium and Izod Center, said AEG “will likely realize that it may have to be disassembled to move out through the door. The sum of its parts will still yield a tidy sum, but it just may be too big for one buyer.”
Last week’s announcement grabbed headlines — and interest. One sports consultant said he received calls from two developers, one in the U.S. and one international. They both asked whether he thought AEG would be interested in selling only Staples Center, plus the development rights to L.A. Live, the entertainment district across the street from the arena, and Farmers Field, the planned NFL stadium. Both suitors told the source they were in financial position to own the stadium and a pro football team in Los Angeles.
“It’s a real estate play for them,” the consultant said. “What happens if someone comes in with big numbers for a couple pieces and AEG says it’s all or none?”
Some sources think a sale of AEG hurts the odds of the NFL returning to Los Angeles, but Leiweke quickly dismisses the notion. “There’s a new owner of AEG, but the owner of Farmers Field is still AEG,” he said. “AEG is the same management company. … AEG is not going away.”
AEG may not be going away, but the man who built it likely is.
Staff writers Daniel Kaplan, Bill King and Terry Lefton contributed to this report.
Photo by:GETTY IMAGES
MLS Los Angeles Galaxy
NBA Los Angeles Lakers (30 percent stakeholder)
MLS Houston Dynamo (50 percent stakeholder)
American Hockey League Manchester (N.H.) Monarchs
German Hockey League teams, the Eisbären Berlin and the Hamburg Freezers
49 percent ownership of Hammarby IF (Stockholm)
> U.S. venues owned and/or operated by AEG
Photo by:GETTY IMAGES
AT&T Center (San Antonio)
Barclays Center (Brooklyn, N.Y.)
BBVA Compass Stadium (Houston)
Citizens Business Bank Arena (Ontario, Calif.)
Consol Energy Center (Pittsburgh)
Farmers Field*, ** (Los Angeles)
FedEx Forum (Memphis)
Home Depot Center* (Carson, Calif.)
Jobing.com Arena (Glendale, Ariz.)
KFC Yum! Center (Louisville, Ky.)
O.co Coliseum (Oakland)
Oracle Arena (Oakland)
Prudential Center (Newark, N.J.)
Rentschler Field (East Hartford, Conn.)
Rose Garden (Portland)
Sprint Center (Kansas City)
Staples Center* (Los Angeles)
Target Center (Minneapolis)
U.S. Bank Arena (Cincinnati)
XL Center (Hartford, Conn.)
> Venues outside the U.S. owned and/or operated by AEG
Photo by:GETTY IMAGES
Brisbane Entertainment Centre (Brisbane, Australia)
Lanxess-Arena (Cologne, Germany)
MasterCard Center^ (Beijing)
Mercedes-Benz Arena^^ (Shanghai)
Newcastle Entertainment Centre (New South Wales, Australia)
O2 Arena* (London)
O2 World Berlin* (Berlin)
O2 World Hamburg* (Hamburg, Germany)
Perth Arena** (Perth, Australia)
Stockholm’s primary sports venues — Tele2 Arena**, Ericsson Globe, Annexet, Soderstadion and Hovet — are all owned by the city and operated by AEG’s Stockholm Globe Arenas subsidiary
Suncorp Stadium (Brisbane, Australia)
The Hydro (Glasgow, Scotland)
Ülker Sports Arena (Istanbul)
Volksbank Arena (Hamburg, Germany)
VTB Arena and Dynamo Moscow Stadium** (Moscow)
* Owned by AEG
** Under construction or late stages of development
^ Co-owned through a joint venture with the NBA and Bloomage International Investment Group
^^ Co-owned through a joint venture with the NBA and Oriental Pearl Group
Source: SportsBusiness Journal research
■ June: Phil Anschutz becomes a major investor in Major League Soccer; when the league began its first season, in 1996, he owned the Colorado Rapids.
■ October: NHL board of governors unanimously approves the sale of the Los Angeles Kings to Anschutz and Ed Roski.
■ June: After serving four years as president of the Denver Nuggets, Tim Leiweke is named president of the Kings.
■ December: A 20-year, $116 million naming-rights deal is announced with Staples for the new AEG-owned arena in downtown Los Angeles. At that time, it was the most lucrative naming-rights deal in sports history.
■ October: AEG purchases the Los Angeles Galaxy from Los Angeles Soccer Partners for a reported $26 million.
■ October: The $400 million AEG-owned Staples Center opens.
■ AEG holds ownership stakes in nine pro teams in the U.S., including six MLS clubs: Fire, Rapids, United, Galaxy, MetroStars and Earthquakes. In addition to the NHL Kings, AEG owns stakes in the Lakers and AHL (N.H.) Monarchs.
■ June: The Home Depot Center, a $150 million, 125-acre development, opens in Carson, Calif.
■ September: AEG sells the Colorado Rapids to Kroenke Sports Enterprises.
■ November: Leiweke and owner’s representative Tim Romani solidify their 13-year relationship by forming a new company called Icon Venue Group, a joint venture between AEG and Romani Group.
■ December: AEG announces that the San Jose Earthquakes will move to Houston. The team is later renamed the Houston Dynamo.
■ March: AEG sells the New York/New Jersey MetroStars and a 50 percent stake in the team’s new stadium in Harrison, N.J., to Red Bull. The company had owned the team since 2001.
■ January: AEG’s Galaxy shocks the world by signing David Beckham to a five-year deal worth a reported $250 million.
■ January: AEG sells D.C. United to a group led by Victor MacFarlane and Will Chang for $33 million.
■ June: The AEG-operated O2 Dome opens in London. AEG owns and operates all three O2 venues in Europe.
■ September: AEG closes a deal to have Andell Holdings buy its Chicago Fire for a reported $35 million.
■ October: The $286 million AEG-operated Sprint Center opens in Kansas City. AEG invests $53.5 million into the project in return for a 35-year management contract. The arena does not have a major league sports tenant.
■ October: L.A. Live, a $2.5 billion, 4 million-square-foot sports, residential and entertainment district, opens in downtown Los Angeles. ESPN begins broadcasting the 1 a.m. ET edition of “SportsCenter” from there in 2009.
■ December: The NBA and AEG outline a joint partnership to operate the 18,000-seat basketball arena built for the 2008 Beijing Olympics. The two will jointly operate, manage and book the facility known as the Wukesong Indoor Stadium.
■ May: AEG buys part of Golden Boy Promotions, becoming the second-largest shareholder after Oscar De La Hoya.
■ May: AEG creates AEG Global Partnerships to focus on its international business. Todd Goldstein, who joined AEG in 1999, is named president.
■ October: Staples extends its naming-rights agreement for the Staples Center. The company’s original 20-year naming-rights agreement will now be extended in perpetuity, a first for a big league arena.
■ December: The NBA-AEG joint venture sells China’s first arena naming-rights deal. Shanghai’s $280 million arena will bear the Mercedes-Benz name.
■ January: AEG announces it has signed Farmers Insurance to a 30-year, $700 million naming-rights deal for a proposed football stadium in downtown Los Angeles, the biggest price tag for any naming-rights deal in the world.
■ July: AEG announces a deal to develop a $1.5 billion sports and entertainment complex in Moscow. The project, which will include a 45,000-seat soccer stadium and a 12,000-seat arena, is scheduled to open in 2016.
■ August: AEG officially launches Axs, its new ticketing company.
■ February: AEG creates a new division, AEG Sports, comprising 11 franchises and properties.
■ May: The $95 million BBVA Compass Stadium opens as the home to the MLS Houston Dynamo. AEG, team co-owner and stadium operator, financed two-thirds of the project, and brokered a 10-year, $20 million naming-rights deal.
■ June: After 17 years of ownership, Anschutz gets his hardware as the Kings win the Stanley Cup. Leiweke: “If you follow the chain, every decision we made in this company somehow goes back to the Kings. The Kings are the foundation we built this company off of.”
As the NBA wrestles with how to divide up to $100 million in potential revenue from jersey sponsorships deals, some teams have taken the next step toward making those sales, hiring agencies to help them sell the anticipated uniform logo patches.
Officials at Stamford, Conn.-based Repucom said they are working with a handful of NBA teams to determine the potential value of the jersey advertising. While neither the company nor the NBA would disclose which teams have signed deals for valuation work, Orlando Magic officials confirmed that they have hired Repucom to help guide them toward a potential jersey advertising deal.
The patches being considered would mirror the size and positioning of this year’s NBA Finals patches.
Photo by:NBAE / GETTY IMAGES
“This is the type of sale that isn’t done in a short amount of time,” said Magic CEO Alex Martins. “It takes a lot of discussion with a number of firms, and it’s also about getting into [a company’s] budget cycle for the upcoming year. I would estimate that it is at least a six-month sale process.”
First, however, NBA ownership must reach consensus among teams about who sells the inventory and what impact it will have on revenue sharing. One approach is to have each team sell and keep the revenue from its own deals; another centers on pooling the revenue and adding it to the league’s new revenue-sharing system. Still another scenario — perhaps the least likely, but it remains a possibility — is that the league sells a deal across all 30 teams.
“We are all going through the exercise of trying to determine value for when we get the green light to go to market,” said Boston Celtics President Rich Gotham, adding that his team has spoken to but not yet hired an outside consultant to help with valuation. “Certainly it needs to be a big number to be worth doing, and our research is showing that it should be. How the pie gets divided is not as meaningful right now to us as getting a new asset to sell and finding out what it’s worth.”
With every other U.S. league watching closely, the NBA in July considered a plan that would put a 2.5-inch-by-2.5-inch logo patch on uniforms for the 2013-14 season. At next month’s board of governors meeting in New York, league officials are expected to take the next step, addressing the heart of the matter: What is that uniform advertising worth, and how would the revenue be divided? Along with that comes the question of whether it’s the teams or the league that will sell the advertising.
According to one team executive, the biggest issue is that question of whether the expected revenue windfall from the jersey deals will be shared among large and small markets.
“Does it go into a general fund, or do the [Los Angeles] Lakers and other big market teams get to keep all the revenue from a deal?” the executive said.
Some of the most optimistic early projections had jersey ad patches for larger market teams at more than $5 million annually. At the July meeting, Commissioner David Stern said the league could gain as much as $100 million in annual revenue from uniform advertising, or an average of about $3 million per team.
NBA teams are free to pursue their own deals either with Repucom or other brand analysis agencies.
“We are trying to do our due diligence now, and when the approval comes, we will be ready,” Martins said. “Nothing has been determined, but my sense is that it will be part of the board meeting [next month].”
Unable to come to terms with incumbent beverage rights holder Pepsi on the value of the burgeoning bottled water category, the St. Louis Rams are digging their own well.
The team is licensing Chesterfield, Mo., water distributor AquaSky to produce bottled water with Rams branding. The water will be called Thirst & Ten and will be sold in 16.9-ounce plastic bottles bearing the Rams’ colors and logo and the team’s URL.
The Rams have licensed St. Louis-area water distributor AquaSky to produce Thirst & Ten water with the team’s branding on it.
Pepsi had held the Rams’ water rights since 2007 and renewed recently for soft drinks, but the Rams carved out water as something they wanted to own.
“Dynamics in the water category have changed with consumer tastes. You’ve got increased purchase without a lot of margins for big beverage companies, so they don’t give water much marketing support, which we will,” said Rams CMO Bob Reif. “We believe this is a model a lot of teams will want to look at.”
Neither Reif nor AquaSky would discuss revenue specifics of the deal, believed to be one of the first times an NFL team has licensed its intellectual property within the beverage category.
Given the unique nature of the deal; ongoing concern at NFL headquarters regarding how team IP is used on consumer products; ramifications for other teams; and the fact that Pepsi and Gatorade are two of the largest NFL leaguewide sponsors, Thirst & Ten was highly scrutinized by league attorneys.
Outside the Rams’ home stadium, the water will be available at the team’s Continuity X-sponsored practice facility. The Rams also hope to push it into some of their retail sponsors, which include Schnucks supermarkets and Mobil On the Run convenience stores.
Since it is a local NFL team deal, the water can only be sold within a 75-mile radius of St. Louis.
As the Rams’ official water, the deal gets AquaSky IP and pouring rights, along with stadium LED and static signage.
In addition to stadium sales, the Rams plan to promote the water brand at team events, including press conferences and other team-controlled functions. However, Gatorade’s massive leaguewide contract will keep Thirst & Ten off the sidelines during game days.
“It’s a fairly standard sponsorship in a fairly unusual category,” said Ryan Cliffe, the Rams’ manager of corporate sales and support, who put the deal together.
Like AquaSky’s main brand of water, Rayn, Thirst & Ten will be marketed as “bottled rainwater,” collected from the sky. AquaSky also sells an H2Orange water brand in Texas that plays on University of Texas affinities but is unlicensed.
“We think this a great opportunity to tie our water with a sports brand everyone knows and is a deal that is unique enough to get us into new retailers,” said Todd Hesker, AquaSky president and founder.