SBJ/April 18-24, 2016/Finance

MLS seeks to buy back stake from Providence

Major League Soccer has approached Providence Equity Partners about buying back the investor’s stake in Soccer United Marketing, the league’s media and marketing business, according to multiple sources.

No formal offer has been made, and Providence has thus far rebuffed the overtures, but the discussions underscore how both the private equity giant and the league consider SUM a valuable commodity.

MLS and Providence declined to comment.

SUM secured a $720 million deal with ESPN, Fox and Univision for MLS and the USSF’s U.S. media rights.
Photo by: GETTY IMAGES
Providence bought its 25 percent stake in SUM for between $125 million and $150 million in September 2011, valuing the entity at between $500 million and $600 million. While no specific valuation has been p laced on that 25 percent stake today, sources said it would likely exceed $200 million, valuing the total SUM business at more than $800 million.

MLS and its owner-investors created SUM in 2002 soon after acquiring the broadcast rights for that year’s FIFA World Cup, rights it then leveraged in a deal with ABC/ESPN to have the broadcasters also air MLS matches. The agency, fully owned and operated by MLS, quickly became a successful and profitable part of the league, acquiring rights to various soccer events and serving as the marketing, media and promotional arm for many soccer parties across North America, including MLS, the U.S. Soccer Federation, Copa America Centenario, the CONCACAF Gold Cup and Champions League, the Mexican Soccer Federation and Chivas de Guadalajara. MLS Commissioner Don Garber also serves as CEO of SUM.

SUM in recent years has secured a number of high-profile deals for its clients, perhaps most notably the $720 million, eight-year deal in 2014 with ESPN, Fox and Univision for MLS and the USSF’s U.S. media rights. It also has secured multiple seven-figure partnerships for MLS in the last 18 months, including deals with Audi, Coca-Cola and Heineken.

Reacquiring the 25 percent stake in SUM would allow MLS and its owner-investors to share more in the increased commercial growth of soccer in the United States and, specifically, in MLS. In 2011, when Providence made its investment into the business, the league and its owners earmarked the funds to help bolster the league’s growth plans, reinvesting the majority at the national level. By reacquiring the SUM stake, the league’s owners would be aiming to capture more revenue from that growth directly.

The league’s owners likely would share in financing the transaction if it were to occur, a source said.

Providence in recent years has sold its most high-profile sports assets: World Triathlon Corp., owner of the Ironman Triathlon series, and its stake in the YES Network.

But David Moross, a pioneer in sports private equity with Falconhead Capital, said it’s unusual for an entity to consider approaching a private equity investor about what could be considered an early buyout. Such transactions typically occur more than five years beyond the investment.

Providence’s Ironman buy came in 2008; it was one of YES Network’s original private investors when the network launched in 2002.

“It tells you good things about U.S.-based soccer interests,” Moross said. “There is no way MLS wants to buy back the stake without truly believing in the health of soccer.”

Unrelated to these discussions, MLS has begun talking with lenders in regard to a credit facility that could allow clubs to borrow from a centralized loan pool, akin to facilities held by the other four major professional North American leagues. No deal is imminent, sources said, but the topic has been discussed at recent MLS board of governors and committee meetings.

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