Los Angeles Dodgers Sale Frenzy Makes Valuation More Circus Than Science
The sports gear is more easily valued than the team.
Frank McCourt is selling the club out of bankruptcy, in part to pay his ex-wife, Jamie, $131 million for her share of the Dodgers agreed to in their October divorce settlement, Bloomberg Businessweek reports in its Feb. 6 edition.
“It’s a sports-business circus here,” said David Carter, executive director of the Sports Business Institute at the University of Southern California. “Every day you see that someone else is throwing their hat in the ring or partnering with somebody.”
More than a dozen groups paid nonrefundable $25,000 entrance fees to get into the bidding and receive the financial documents, Dodger blue caps and balls autograph by Kemp, the Los Angeles outfielder who was runner-up for the National League Most Valuable Player award last season.
That roster was cut to eight last month. Those still involved include Steve Cohen, founder of SAC Capital Advisers; Leo Hindery, who helped form the Yankee Entertainment & Sports Network, the nation’s biggest regional sports network, and Magic Johnson, the basketball Hall of Fame player who helped the Los Angeles Lakers win five championships and has become a business leader.
Johnson, 52, with partners Mark Walter and Stan Kasten, and Cohen, represented by Steve Greenberg, the son of baseball Hall of Fame member Hank Greenberg and a former deputy commissioner of Major League Baseball, are among three bids that are considered likely to succeed, according to people briefed on the latest negotiations. The third in that category is one from Joe Torre, the former New York Yankees and Dodgers manager, and Rick Caruso, chief executive officer of the retail and real estate company Caruso Affiliated. The premium for all is secure financing from a single source, the people said.
Cohen, worth $8.3 billion according to Forbes magazine, has recruited sports agent Arn Tellem as a partner and has retained Populous, the sports architecture company that helped design the new Yankee Stadium, to study enhancements at Dodger Stadium. Los Angeles philanthropist Eli Broad and billionaire recording executive David Geffen have publicly endorsed Cohen’s bid.
McCourt, 58, turned down a $1.2 billion offer for the Dodgers from News Corp. (NWSA)’s Fox and is aiming to get at least $1.5 billion for the team, a sports franchise record, according to people familiar with the sale deliberations. They were granted anonymity because the bidding process is confidential. The McCourts, who made their money running parking lots in Boston, bought control of the Dodgers for $30 million in 2004.
“There are a handful of legacy clubs like the Dodgers in each league,” said Dave Checketts, the owner of the St. Louis Blues, who attempted to buy the Dodgers in 2004. “They’re in major markets and have a history of winning where if you do things right there’s an enormous upside.”
The Dodgers and Blackstone, the investment bank representing the team in the sale, have said the club broke even last season, when it finished 82-79 and in third place in the five-team National League West division, according to a person familiar with the negotiations.
While management underscored stadium improvements such as new seats and redone dugouts, multiple bidders said they would probably have to spend as much as $450 million over the next few years on payroll and upgrades to the ballpark and surrounding infrastructure. Blackstone started conducting management presentations this week, which the bidders say they hope will make the Dodgers’ capital needs and revenue capabilities clearer.
One thing they are sure to ask about: Dodger Stadium parking lots.
In the bid book sent to prospective buyers, the Dodgers parking lot is not listed as part of the sale. Parking is McCourt’s true business, and he currently charges the Dodgers $14 million in rent a year for playing baseball on his land.
So the lot’s not officially included in the offer.
“Here’s the test to see if we get a smart or stupid owner,” Bob Daly, the managing partner of the Dodgers from 1999 to 2003, told the Los Angeles Times on Jan. 25. “If you make a deal and allow McCourt to keep the land and parking lots, you are out of your mind.”
If Blackstone’s presentations at Dodger Stadium and Johnson’s offices in Beverly Hills represent two official nerve centers of the bidding frenzy, the two blocks separating Nate ’n Al, a delicatessen where Torre often drinks his morning coffee, and the Grill On The Alley, near Rodeo Drive in Beverly Hills, form an unofficial third one.
Stanley Stalford Jr., a real estate developer, sat at his table in the Grill to explain why he had paid to have exactly 1,000 signs posted from Orange County up through the San Fernando Valley urging shoppers and motorists to “Own the Dodgers!”
Stalford, 48, grew animated as he talked. He said it has long been his dream to become president of the Dodgers en route to getting elected mayor of Los Angeles. He ticked off the four Dodger World Series he attended.
“You name it, I was there,” he said. “But today’s Dodgers exemplify everything that went wrong in the last decade: easy money, greed, bad governance.”
Even though Stalford is wealthy enough to be known as rich in L.A., he is not angling to become a late-inning bidder. He’s more of a gadfly for the fan.
What if, he said, the next owner defaults as well? Or if there’s a mutiny among the new partners? How can baseball risk losing the Dodgers twice?
His solution: Sell shares to fans to help raise a minority interest. It’s worked in Cleveland (with baseball’s Indians), and spectacularly in Green Bay, Wisconsin, where the community shares ownership of the Packers.
Stalford said he envisions the next owner selling a minority stake in the Dodgers through an initial public offering of shares, with no minimum purchase. The proceeds of the offering, he said, could then be used to discharge some of the debt that will inevitably have to be taken on to finance the deal.
“If you’re going to sell your soul, why not to the dyed- in-the-wool Dodgers fan?” he said.
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