Sports Turns Into Private Equity Playground
NEW YORK ( TheStreet) -- After taking on Corporate America, private equity firms are set to storm the gate of sports teams as owning a sports team becomes less of a pastime for the mega rich.
Already, a flurry of team sales to private equity titans shows an increasing interest by buyout investors in the sports world. With a flurry of ownership changes in the NBA to go with the bankruptcy sale of the Los Angeles Dodgers and the New York Mets woes luring financiers, the question now is whether sports teams will be seen as a bona-fide investment.
|Barbarians are at the ticket gate of a stadium near you|
Watch for a resolution to the L.A. Dodgers bankruptcy and the sale of the NHL's St. Louis Blues as a leading indicators on how investment firms will enter the sports ownership fray in what they see as profitable or cash generating assets. That would be counter to the traditional reason for owning a team: fan-fever, social graces or simple vanity.
In the Dodgers sweepstakes, private equity firms like KKR(KKR) , Thomas H. Lee and Providence Equity Partners have emerged as prospective buyers, but without a primary interest in the National League ballclub. Instead, the private equity investors may be eyeing the Dodgers sports programming business, which have a similar value as Madison Square Garden's (MSG) MSG Networks, the New York Yankee-owned YES Network and the Boston Red Sock-run New England Sports & Entertainment Network .
In February, Forbes reported that the private equity firms were looking at joining one of the remaining groups bidding on the Dodgers, with the possibility of contributing up to $300 million in an overall acquisition that is likely to fetch $1.5 billion. Those reports indicated that the buyout firms would be interested in the Dodgers sports programming rights, which could pave the way for the creation of an independent sports network.
A BusinessWeek feature indicated that many of the Dodgers interested buyers are targeting the baseball teams distribution rights, which could net a more than $3 billion T.V. deal. Those prospective buyers include Time Warner Cable (TWC) and Comcast(CMCSA) , in addition to a consortium led by Leo Hindery of the YES Network that includes private equity fund Colony Capital , according to BusinessWeek.
If Hindery's consortium were to win, they could attempt to build an independent network like YES that would put it in a strong negotiating stance with a cable systems looking to distribute games.
In the 2009 sale of the Chicago Cubs by the then-bankrupt Tribune Company , the $845 million sale to investnements mogul Tom Ricketts was bolstered by the Cubs 20% stake Comcast SportsNet Chicago.
The value of an independent network in bargaining with a cable provider was also highlighted in the spat between Time Warner Cable and MSG, as a Jeremy Lin-inspired Knicks winning streak brought Linsanity to a stalled programming negotiation.