Editor's note: This story is revised from the print edition.
Trustees for the embattled heirs of Tom Benson valued his New Orleans Saints at between $1.5 billion and $1.65 billion, around twice his own estimate, and they valued his New Orleans Pelicans three to four times more than Benson did.
Those figures, disclosed recently for the first time in court filings, will take center stage next week in the scheduled five-day trial between Benson and the two trustees, whom he is suing for blocking his attempt to strip the teams from trusts he established for his estranged heirs.
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Saints and Pelicans owner Tom Benson
Photo by: GETTY IMAGES
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The trustees, who offered the higher figures, contend Benson, 88, is undervaluing the teams in order to substitute inferior notes to replace the heirs’ interests in the clubs.
The conflicting franchise values on one level underscore the foolhardiness of trying to speculate on price tags for teams. Who would have thought, for example, the Los Angeles Clippers could sell for $2 billion, as they did in 2014, or that the Los Angeles Dodgers before that (2012) could sell for even more? Traditional franchise valuation metrics demanded far lower prices, but such numbers were no match for what the teams’ eager buyers were willing to pay.
“The value is what someone is willing to pay for it,” said Bob Caporale, chairman of Game Plan, which advises on buying and selling sports teams.
But on another level, the wide gap between Benson and the trustees, who hired their own valuation firms, reflects the disdain the owner has for his heirs: his daughter Renee and her children, Ryan and Rita — a group identified in the court filings as the 3Rs.
In a deposition earlier this year, he accused them of trying to kill him and said his intent was for them to get nothing.
“They hired attorneys, and we didn’t have to give them anything,” Benson said according to portions of a March deposition transcript filed with the court.
Under terms of the trusts Benson established for the 3Rs, however, if he were to move their team interests out of the trusts, he must replace those interests with assets of equal value. The trial scheduled for next week will address whether the notes he promises to put into the trusts are of equal value — and thus, the importance of the valuations.
One of the two trustees, Mary Rowe, valued the Pelicans at $588.2 million, using valuation firm Stout Risius Ross Inc., according to court documents. That is far higher than the estimate offered by Benson. According to the court filings, the SRR valuation stems from valuing one share of Benson Basketball at $3,600. Benson’s valuation of a share in the Pelicans ownership group is $900, one-quarter SRR’s amount.
SRR estimated the Saints’ franchise value, pegged to the day in early 2015 when Benson tried to move the team interests out of the trusts, at $1.65 billion, while PricewaterhouseCoopers, retained by the other trustee, Robert Rosenthal, estimated the team’s value at $1.51 billion. Each of those numbers would seem in line with recent NFL team deals. The Buffalo Bills, for example, sold for $1.4 billion in 2014, and the Bills are in the bottom half of the NFL in terms of revenue. According to the court filings, the Saints are in the top half — yet Benson’s valuation of the Saints is far lower than the amounts quoted by the trustees’ firms.
“It’s nonsensical,” said sports investment banker Sal Galatioto of Benson’s valuation of the Saints being less than $1 billion. “No one would believe it.”
Caporale of Game Plan agreed, noting that NFL teams long-ago crossed the $1 billion threshold in value.
The federal court overseeing the case will try to balance the competing numbers and has even enlisted two valuation experts of its own to help navigate the arguments: Timothy Lee of Mercer Capital, and John Marcus of Marcus, Hastings & Associates.
Benson for his valuations hired Empire Valuation Consultants, which used team cash flow to derive its resulting figures, according to court filings. That method is rarely used in sports, where franchise revenue and previous franchise sales are more common metrics. One argument Empire makes, though, is that the interests of the 3Rs at the time of the proposed swap were not control stakes, so there should be a significant discount in valuing their shares. Typically, there is a minor discount for noncontrol stakes, though not always.
