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Magic Johnson sits with Frank McCourt during a game between the Los Angeles Dodgers and the San Diego Padres. The Dodgers are finally sold. Now we can move on to the Padres!
Well, our long local nightmare has finally drawn to an anticlimactic close. After a briefly alarming delay last night, the Los Angeles Dodgers are now no longer the property or Frank McCourt but belong instead to Guggenheim Baseball Management, a group made up chiefly of Magic Johnson, Stan Kasten, and Mark Walter, the CEO of Guggenheim Partners. The purchase price was a whopping, record-setting $2.15 billion.
The thorn in the side of Angelenos who grew to...well, let's just say dislike McCourt over the years will be the former owner's 50-percent stake in the parking lots around Dodger Stadium. GBM will get to collect the parking fees for games, but McCourt will be able to propose development plans — although they'll have to be approved by the new owners.
The press conference is tomorrow. Don't know where it is yet, nor what time, but rumor has it that Walter will be in attendance.
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Starting pitcher Anthony Bass #45 of the San Diego Padres delivers against the Colorado Rockies at Coors Field on April 17, 2012 in Denver, Colorado.
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.
It doesn't say Time Warner Cable.
I caught wind of some rumors about a week ago that the Dodgers' new owners, Guggenheim Baseball Partners, led by Magic Johnson and Guggenheim Partners CEO Mark Walter, might have done a sort of pre-deal with...somebody for the team's future broadcast rights. It appears that the rumor was just that. Here's Bill Shaikin from the L.A. Times (note than Fox has the current broadcast deal):
Under its settlement with the Dodgers, Fox had the right to challenge any sale in which rival Time Warner Cable was involved. The Dodgers already had told the court that TWC was not involved, but Fox asked for assurances from the new owners.
According to Thursday's filing, the new owners would state for the court record that TWC is not directly or indirectly funding the purchase of the Dodgers and that no "formal or informal agreements have been reached with TWC to telecast [Dodgers] games for the 2014 MLB season or beyond." U.S. Bankruptcy Judge Kevin Gross would then include that language in his order approving the sale.
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Andre Ethier #16 of the Los Angeles Dodgers greets his teammates after being introduced on Opening Day prior to playing the San Francisco Giants at Dodger Stadium on March 31, 2011.
Welcome to your 2012 Dodgers home opener revenue projection!
Since 2009, the Los Angeles Dodgers have seen their yearly revenues fall into a death spiral, culminating in Frank McCourt's decision to put the team into bankruptcy and — just a few weeks back — sell it to Magic Johnson, Stan Kasten, and a group of investors headed by Guggenheim Partners' CEO Mark Walter. The numbers are rough: $286 million in 2009 down to $230 million (estimated) in 2011. That slide happened against the backdrop of more than $500 million in debt, now due to be discharged by the sale of the team and assumed by the new owners.
Oh, and Dodger Stadium needs to be fixed up. That will cost at least $200 million.
Last year, the L.A. Times broke down the revenues:
[T]icket receipts of $107.2 million were the largest contributor (37.5%) to the Dodgers' $286 million in total revenue that year.
The second-biggest contributor was $42.6 million from MLB funds that the teams divide, such as from national television broadcasts and MLB.com. That was followed by local broadcasting revenue ($41.5 million), advertising promotions ($27 million), concessions ($25.5 million), suite rentals ($20 million) and parking ($11 million).
Is this whole thing just a toy for some rich men playing with other people's money?
I'm glad that some really big questions about the Dodgers deal are finally being asked by one of the biggest names in financial journalism. Andrew Ross Sorkin, in his DealBook column at the New York Times, admits that for the past few weeks, he's been "puzzled" by the terms of the sale, with Guggenheim Baseball Partners — Magic Johnson, Stan Kasten, Peter Guber, and Guggenheim Partners — shelling out $2.15 billion for the team, a record price.
The winning bid was led by Mark Walter and his firm, Guggenheim Partners, which most people in sports — and frankly, even on Wall Street — know very little about. (Peter Guber, the film producer behind “Rain Man” as well as Stan Kasten, the former president of the Atlanta Braves, are also involved.)
A quick background check and some back-of-the-envelope math raises an obvious red flag: how on earth can this group of individuals afford to pay $2 billion in cash?
The answer is that they probably can’t — at least, not by themselves.
Mr. Walter, along with his colleague Todd Boehly, Guggenheim’s president, appear to be living out a childhood fantasy using other people’s money, some of whom may not even realize it.