Explaining Southern California's economy

Why LA should be glad Steven Cohen didn't buy the Dodgers

Hedge Fund Manager Charged In Major Insider Trading Case Appears In Court

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Former hedge fund portfolio manager Mathew Martoma exits a New York federal court after being charged in one of the biggest insider trading cases in history. He worked for CR Intrinsic Investors LLC, a firm that was associated with Steven Cohen's SAC Capital Advisors.

Speculation about the size of a potential deal for AEG — estimates range from $8-$10 billion — has quickly made Angelenos forget about the $2-billion-plus price that Guggenheim Baseball Management and Magic Johnson paid for the L.A. Dodgers earlier this year. Angelenos may have forgotten something else: Until Guggenheim Partners swept in from Chicago to add another half billion to the deal, the price for team was hovering around $1.6 billion and the leading bidder was Steven Cohen.

As I explained at the time, Cohen — one of Forbes' wealthiest Americans, with a net worth north of $8 billion — was one of the few bidders for the Dodgers who could basically write a check for the team. In fact, that seemed the likely outcome, until Mark Walter and Guggenheim emerged from the background. Cohen had even paired up with local L.A. billionaire Patrick Soon-Shiong, the richest guy in town. It wasn't enough in the end to trump Guggenheim's bid.

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AEG sale: Guggenheim Partners and Soon-Shiong form bidding group

Government And Business Leaders Speak At Urban Economic Forum In Los Angeles

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Magic Johnson greets Patrick Soon-Shiong during a Urban Economic Forum co-hosted by White House Business Council and U.S. Small Business Administration. They could be partners (sort of) if Soon-Shiong and Guggenheim Partners buy AEG.

Patrick Soon-Shiong — the richest man in Los Angeles, minority owner of the Lakers, and recently thwarted suitor for the Dodgers — has reportedly hooked up with none other than the investors who did the thwarting on his billion-plus bid for the Boys in Blue: Guggenheim Partners.

Or at least the adventurous investing subset of Guggenheim — a relatively staid Chicago-based manager of insurance-fund investments and other assets totaling around $180 billion — made up of CEO Mark Walter and executive Tim Boehly. They formed Guggenheim Baseball Management with Magic Johnson as a front man to snatch the Dodgers away from Soon-Shiong and hedge-funder Steven Cohen at the eleventh hour, with a bid more than $500 million above what anyone had expected.

It was the biggest deal in U.S. sports up to that point. But if Soon-Shiong, Walter, Boehly and whoever else they yank onboard manages to buy all of AEG, the deal would blow the Dodgers' $2 billion away. It could go for anywhere from $4 billion to even as high as $7 or $8 billion.

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Follow the AEG money: Patrick Soon-Shiong, Blackstone, and Guggenheim Partners

Government And Business Leaders Speak At Urban Economic Forum In Los Angeles

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Magic Johnson greets Patrick Soon-Shiong during a Urban Economic Forum co-hosted by White House Business Council and U.S. Small Business Administration at Loyola Marymount University. Soon-Shiong has been named as an potential bidder for AEG, the sports and entertainment giant.

Patrick Soon-Shiong — the richest man in L.A., with a net worth north of $7 billion — has been named as a bidder for AEG, the L.A.-based sports/entertainment giant that owns the Lakers, the Staples Center, and L.A. Live, among many other assets and properties worldwide.

AEG would be a pretty big bite — L.A. Live and Staples could fetch $1 billion apiece, and stakes in the sports franchises could add up to half a billion — so Soon-Shiong is reportedly not going it alone. He's joined with Guggenheim Partners' executives Mark Walter and Todd Boehly, who formed Guggenheim Baseball Management earlier this year to buy the Dodgers for more than $2 billion.

AEG has hired the Blackstone Group to manage its sale. Blackstone also handled the sale of the Dodgers, conducting the final auction at which Guggenheim swept in at the end with a winning bid that was half a billion more than the next closest buyer, hedge fund guy Steven Cohen, whose $1.6-billion offer had looked indomitable up to that point. Ironically, Soon-Shiong joined with Cohen late in the game, only to lose out.

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

San Diego Padres v Colorado Rockies

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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. 

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Magic Johnson buys the L.A. Dodgers for $2 billion

Capitol Hill Conference: Future Directions In The Fight Against HIV/AIDS

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Laker great Earvin "Magic" Johnson has won the auction for the L.A. Dodgers. Price? $2 billion.

The Wall Street Journal is reporting that Magic Johnson and his group, including Stan Kasten and Peter Guber, have won an auction for the Los Angeles Dodgers. Johnson was among three bidders approved by Major League Baseball today.

Price? $2 billion, the largest ever paid for a pro sports franchise. 

The losers were hedge-fund billionaire Steven Cohen, who had joined with L.A. billionaire Patrick Soon-Shiong in a bid that many — myself included — thought had too much financial firepower. The other defeated bidder was Stan Kroenke, owner of the St. Louis Rams. This clearly ups the chances that the Rams may become the L.A. Rams relatively soon, to provide the Downtown AEG stadium project with an NFL team.

Magic was the local favorite, so L.A. ultimately got what it (probably) wanted here: a hometown favorite running the show, even if the bulk of the financing came from Guggenheim Partners in Chicago. $2 billion, if the figure is correct, isn't chump change, either. Dodgers owner Frank McCourt stands to make twice what everyone thought he might make, when the bids were in the $1.5-billion ballpark.

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