SBJ/Oct. 27-Nov. 2, 2014/Franchises

Team valuations reflect hot market

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Sports team prices continue to soar, with values placed on the Chicago Cubs, Atlanta Hawks, Brooklyn Nets and even Chivas FC of MLS now all pegged at once unthought-of levels.

Each of the teams is either in whole or partly for sale.

A 20 percent stake in the Chicago Cubs that’s for sale values the team at more than $2 billion.
Photo by: GETTY IMAGES
The Cubs’ value, calculated for the team’s current sale of around 20 percent of the club, is in excess of $2 billion, sources said, with that process expected to finish soon. Galatioto Sports Partners is managing the sale. GSP representatives declined to comment.

Meanwhile, the Hawks, which owner Bruce Levenson announced last month that he’d sell, are expected to go for a minimum of $750 million, according to finance sources — an amount that before the

SBJ Podcast Archives:
From June 30: NBA writer John Lombardo and editor Tom Stinson discuss what the Clippers' sale price means for overall franchise values, why it is an outlier and what its impact could be.

$2 billion sale of the Clippers this summer would have been an NBA high. The Milwaukee Bucks’ $550 million sale this spring stands as the NBA benchmark outside of the Clippers’ deal, so a $750 million Hawks valuation would serve as a notable further increase in the sale price of NBA clubs.

“What you are seeing are buyers [who] are valuing teams the same way they traditionally have, but in addition to looking at team revenues they are also investing in the leagues on the back of spectacular increases in media-rights fees,” said Charles Baker, partner in DLA Piper’s global sports, media and entertainment group, which advises on sports team sales. “For example, if you are looking to buy an NBA team, you are not just buying that team but buying a one-thirtieth interest in the NBA, which has proved to be a very solid and sustainable investment, and it’s obviously a league poised for global growth.”

The NBA this month renewed its broadcast contracts with ESPN and Turner for $24 billion across nine years, almost triple the average annual value compared with their prior deals ($7.44 billion across eight seasons).

The Atlanta Hawks are expected to fetch at least $750 million.
Photo by: NBAE / GETTY IMAGES
Even Chivas, the laggard MLS club that is on the market, is expected to get a price that skips into nine figures. Based in Los Angeles, Chivas has the nation’s No. 2 market going for it, but sources said MLS’s strong media deals are also playing a part in placing a solid valuation on a team that drew just more than 7,000 fans a game this past season. That’s not only far and away the worst gate in the league this year, but Chivas has been at the bottom of MLS in attendance for three consecutive years.

MLS, which assumed ownership of Chivas earlier this year, is expected shortly to sell the club to a group that reportedly would shut it down for two seasons while the new owners build a new stadium. Chivas currently shares StubHub Center with the LA Galaxy. Helping to stoke the sale price is the fact that MLS this summer secured eight-year deals with ESPN, Fox and Univision, effective next year, that are priced at five times the average annual value of the league’s current media contracts.

There are, however, some cautionary notes, not the least of which are the struggles of certain regional sports channels. The Los Angeles Dodgers, for which Guggenheim Partners paid $2.15 billion in 2013, holds a $7 billion, 25-year rights deal with Time Warner Cable, but TWC has largely been unable to distribute the new channel at the asked-for subscriber fee, significantly depressing viewership of Dodgers games. Elsewhere, the Houston Astros’ RSN has been thrown into bankruptcy court amid lawsuits, impairing that team’s local visibility.

But local rights deals have been hot in other markets, and part of the value of the Nets is that club’s ability to soon renegotiate its RSN deal with YES Network. The Sacramento Kings, for example, secured an extension earlier this year with NBC Sports Group worth an average of $35 million a year over the next two decades, a lucrative sum for a team that plays in the country’s 20th-biggest designated market area. The Nets are currently at $25 million a year playing in the nation’s No. 1 market.

The 20 percent stake of the Nets that is for sale has been a tough sell. Evercore Partners put the Bruce Ratner-controlled piece on the market earlier this year but pulled it off after the real estate developer thought the team should be valued more highly than $1 billion after the Clippers’ sale, sources said. Evercore recently began shopping the piece again, but it’s unclear at what price.

There are other complications with that stake, not the least of which is that the controlling owner of the team, Mikhail Prohkorov, has rung up sizable losses — which likely worries potential new investors.

Meanwhile, the Hawks’ sale also is believed to have sidelined some potential Nets’ LP owners, who are waiting on the Atlanta team to hit the market. Levenson announced the planned sale in September and last week tapped Goldman Sachs and Inner Circle Sports to manage the transaction. The NBA league office is expected to play a big role in managing the sale, as well.

Finance sources expect the team to sell for at least $750 million and said they would not be surprised if the final price approaches $1 billion.

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