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SBJ/September 24-30, 2012/Franchises
Blockbuster that will change face of sports
Anschutz’s decision to sell leaves question of who could buy company valued at up to $8B
Published September 24, 2012, Page 1
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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.
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.
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.”
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.
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.