Basketball Hall of Fame member Magic Johnson and a group of investors that includes Guggenheim Partners Chief Executive Officer Mark Walter won the auction for the bankrupt Los Angeles Dodgers with a bid of more than $2 billion, doubling the previous record amount paid for a major U.S. professional sports franchise.
The group was chosen yesterday by Dodgers owner Frank McCourt over billionaire Steve Cohen, who runs hedge fund manager SAC Capital Advisors LP, and Stan Kroenke, who owns the National Football League’s St. Louis Rams and Arsenal of English soccer’s Premier League.
“The word is ‘Wow,’” Leo Hindery, the former chief executive of the Yankees Entertainment & Sports Network and a member of the unsuccessful bid group led by Colony Capital Chairman Tom Barrack, said in a telephone interview today. “Unbelievable. Look what this does to comps on every sports transaction until the end of time. What you want to do today is own the Kansas City Royals. You just got a new top out there.”
Johnson’s group also includes Hollywood producer Peter Guber, chief executive officer of Mandalay Entertainment Group and co-owner of the National Basketball Association’s Golden State Warriors, and former Atlanta Braves and Washington Nationals President Stan Kasten, who’ll relocate to Los Angeles and run the Dodgers. Two years ago Johnson, 52, sold his minority stake in basketball’s Los Angeles Lakers, where he won five championships, to billionaire Patrick Soon-Shiong, who was a member of Cohen’s group.
“I am thrilled to be part of the historic Dodger franchise and intend to build on the fantastic foundation laid by Frank McCourt as we drive the Dodgers back to the front page of the sports section in our wonderful community of Los Angeles,” Johnson said in an e-mailed statement from the team.
McCourt had been seeking at least $1.5 billion, people familiar with the sale deliberations, who were granted anonymity because the bidding process was confidential, said last month. The price topped the $1.1 billion real estate developer Stephen Ross paid for the NFL’s Miami Dolphins.
“This agreement with Guggenheim reflects both the strength and future potential of the Los Angeles Dodgers, and assures that the Dodgers will have new ownership with deep local roots,” McCourt said in a statement.
Debt and Divorce
McCourt may collect more than $1 billion from the transaction after paying off all the Dodgers creditors and his ex-wife, Jamie McCourt. The team listed total liabilities of $706 million, including $410 million in long-term debt, in its latest operating report filed with the bankruptcy court. McCourt must also pay Jamie $131 million under their divorce settlement.
McCourt and affiliates of the buyers will form a joint venture to acquire the Dodgers’ Chavez Ravine property for another $150 million, according to the statement. Chavez Ravine is where Dodgers Stadium and its parking lots are located.
Johnson and his partners acquire one of the most storied teams in U.S. sports. The Dodgers broke Major League Baseball’s racial barrier in 1947 and, with the New York Giants 11 years later, became the first franchises to move to the West Coast.
The auction took place over several weeks and differed from the sale of any other Major League Baseball team, in part because it was overseen by a retired federal judge. McCourt won that and other concessions from MLB as part of a settlement that ended a months-long bankruptcy court fight.
McCourt has until April 6 to make public details of the sale as part of the team’s bankruptcy-exit plan. The sale must be completed by April 30, the day McCourt is required under a divorce settlement to pay his ex-wife.
To persuade McCourt to sell, MLB agreed last year to pre- approve a list of bidders and let retired U.S. District Court Judge Joseph Farnan have the final word on certain disputes related to the auction.
McCourt put the Dodgers into bankruptcy in June, claiming Baseball Commissioner Bud Selig forced the team into a cash crisis by rejecting a new contract with News Corp.’s (NWSA) Fox Sports, which holds the team’s television rights through the 2013 season.
Once under court protection, McCourt lost the support of the network when he tried to solicit bids for a new television deal earlier than allowed under the Fox Sports contract. McCourt planned to sell the rights for more than $1 billion to raise enough money to take the team out of bankruptcy.
That plan was attacked by Fox, which claimed it would violate a no-shop clause in the current TV contract.
McCourt settled his battle with MLB in November and dropped his effort to sell the television rights early in January. In return, Fox Sports agreed to support a quick sale of the team.
The sale is part of a bankruptcy-exit proposal, called a reorganization plan, that must be approved by U.S. Bankruptcy Judge Kevin Gross. He is scheduled to consider approval at a hearing April 13.
The Dodgers were put up for sale in November and garnered more than 10 bids, including an offer from Dallas Mavericks basketball team owner Mark Cuban.
Once the new Dodgers owners take control of the team, they will be bound by the current Fox Sports contract, which means they cannot try to negotiate a new television contract until November.
The new owner may sign a traditional rights agreement or, like the New York Yankees did with YES, start a regional sports channel with the baseball team as anchor programming.
Time Warner Cable Inc. (TWC) announced a plan last year to start a regional sports network around the National Basketball Association’s Lakers, where Johnson was a 10-time All-Star selection.
Los Angeles is the No. 2 media market in the U.S. behind New York.
Before the sale, the Dodgers, their stadium and surrounding parking lots were worth $1.4 billion, second among MLB’s 30 teams to the Yankees, according to Forbes magazine.
While based in Brooklyn, New York, the Dodgers became the first Major League Baseball team with a black player when Jackie Robinson took the field in 1947. They started play in 1884 as the Brooklyn Atlantics, and didn’t win their first championship until 1955. Even with devoted fans that lovingly called them “Dem Bums,” they joined the Giants in moving to the West Coast in 1958.
The Dodgers have won six World Series, tied for fifth-most in baseball. Five of them came in Los Angeles, where Duke Snider, Sandy Koufax, Steve Garvey, Fernando Valenzuela and Kirk Gibson led them to championships.
The case is In re Los Angeles Dodgers LLC, 11-12010, U.S. Bankruptcy Court, District of Delaware (Wilmington).