The Breakdown

Explaining Southern California's economy

What's the right price for the San Diego Padres?

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36859 full

Guggenheim Baseball Management (GBM), fronted by Magic Johnson and financed by the $125-billion Guggenheim Partners investment firm, is buying the Los Angeles Dodgers for a record $2.15 billion. But there's another Southern California professional baseball franchise for sale. Maybe not as storied. But still worth some potentially very big bucks. Will the San Diego Padres see their price rise now that Dodgers have hit a grand slam for their sale?

Quite possibly. But you have to take a few factors into account, as well as assess the probable structure of a future deal. First, let's look at how much of a premium the Dodgers' new owners paid on the team's current revenues. It's steep: in 2010, the team did $246 million, so GBM is paying almost 9 times revenue. That figure will drop somewhat when you factor in a potential $5-billion broadcast deal, to be negotiated in about a year. 

The Padres have much lower revenues: $159 million in 2010. They also have an unusual ownership structure, with John Moores having bought the team in 1994 for $94 million, then selling an incrementally increasing interest to Jeff Moorad in 2009 for $530 million. A benchmark figure for the team's value is something in the $530-$600 million ballpark, but it could go higher, based on the Dodgers premium. Although, as Forbes' Mike Ozanian points out, Moores won't have the ability that Dodgers owner Frank McCourt had to put the team in bankruptcy and exit it via a highest-bidder auction he controlled. This is what's prevented Moorad from being able to buy the team: Major League Baseball Commissioner Bud Selig didn't want Moorad to take a $200-million bonus from a new $1.4-billion TV deal to finish buying the team.

If you look at the Padres now, at $530 million they're priced at only a bit more than 3 times revenue. So somewhere between 9 times and 3 times could be about right: 4-5 times revenue. So $700 million could be where the bidding will go. 

Reports are that Peter O'Malley, who sold the Dodgers to Fox in 1998, wants to buy the Padres. His Dodgers bid was rejected earlier this year. It never really seemed like he and his group had the money to run with, among others, Guggenheim and hedge-fund king Steven Cohen (net worth: $8 billion), who's now most likely in the running to buy the New York Mets. 

But that was when the Dodgers were priced at $1.5-$1.6 billion. Can O'Malley and whatever partners he assembles or has already assembled come up with that? Probably. But there may be some other bidders who enter this process. For now, Moores has retained a fairly obscure and specialized New York investment bank, Allen & Co., along with a sports-and-media-focused bank, Moag & Co., to work on the sale.

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