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Home Maury Brown The $1.2B Offer to Buy the Dodgers: Too Much, Too Little, or Out of the Question

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The $1.2B Offer to Buy the Dodgers: Too Much, Too Little, or Out of the Question PDF Print E-mail
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Written by Maury Brown   
Friday, 02 September 2011 14:25

DodgersYesterday, Bill Shaikin of the LA Times reported that Frank McCourt has received an offer to purchase the Dodgers for $1.2 billion. The deal would include the club, real estate associated to the Dodgers, and team media rights. That figure, which would be the highest of all-time for a MLB franchise, was what many were buzzing about.

Of course, there’s more to it than that.

Chinese Investors

After the initial “wow factor” on the offer price sank in, the other big eyebrow raiser was that the letter that McCourt has received from LA Marathon founder Brian Burke, was that the bid offer – all cash – was coming from a group of investment banks based out of the People’s Republic of China. In another nepotistic tie, McCourt owns the LA Marathon.

Jumping over the “communist state” conversation, Burke and Chinese investors are no strangers to Frank McCourt. For one, when Frank was looking for money to stem the flow of red before filing for bankruptcy, he approached Chinese investors regarding $150 million that would be in exchange for an international sports partnership. The deal smelled a bit like some dealings prior with the Red Sox and Rangers in that McCourt envisioned a the Dodgers, a Beijing soccer club, and eventually an English Premier League soccer team in the mix.

But, the question is, would MLB even consider a group from China? In talk with those close to the situation, the fact that the Mariners have been owned by the Nintendo Corporation since the ‘90s would not, in and of itself, prevent a look at investment banks out of China.

The 3-Week Timeline

If there’s something that is really fishy about the offer, it’s this: the deal is reportedly only on the table for 3 weeks. So, even if the deal were consummated today, MLB would have basically 21 days to do their background on the investment group, have the Executive and Ownership Committees in the league vote, and then get the sale approval vote before the 29 other owners to get their approval. As one industry insider said, “If they’re interested in buying the Dodgers, they should be interested beyond 21 days.” Throw in this: look how long it’s taken the owners to get a comfort level with Jim Crane and the Astros. Think voting to bring in Chinese investors on a deal that would be the highest in league history take less?

Is $1.2 Billion Worth It?

Shortly after the news broke on the offer, I was asked to go on 710 ESPN with John Ireland to talk about whether the offer was worth it. Beyond sticking my finger in the wind, I looked at clubs sales and the current offer by Jim Crane for the Astros back to 2002 when the Red Sox were sold. I compared the Forbes valuation to the sale/offer price and calculated the percentage of increase or decrease from the Forbes value.

What was found was this. The average sale/offer price was up just over 21 percent (22.11%) over the Forbes valuation. The largest is the current offer by Jim Crane for the Astros ($680 million) or 43.46 percent over the Forbes valuation of $474 million. The reason? The Astros have reached a deal to create a regional sports network with the Houston Rockets that will bring in additional revenues.

Much like the Astros deal, the lure of a RSN is part of the landscape for any purchase of the Dodgers. No RSN or an RSN in play, media rights are a huge focus for the club right now. Either an auction for the media rights will occur (Frank McCourt has been pushing for that, even though FOX has said they will sue), or if the club is sold, a new media deal with FOX will be reached.

Back to the Forbes valuation and the Dodgers…. The $1.2 billion offer is a 50% increase over the $800 million valuation by Forbes. This while the Dodgers currently sit $770 million in debt.

But, remember, there is the land in play and the aforementioned media rights. So, one might say that while the $1.2 billion offer is high, it’s not astronomically so.

Club

Year

Forbes
(millions)

Actual
(millions)

Increase

LAD

2011

$800

$1,200 *

50.00%

HOU

2011

$474

$680 *

43.46%

TEX

2010

$561

$593

5.70%

CHC

2009

$726

$845

16.39%

ATL

2007

$458

$450

-1.75%

LAD

2004

$424

$430

1.42%

BOS

2002

$498

$660

32.53%

* proposed offers

Does It Happen?

Up front, there was the mention of the Burke/Chinese investors relationship prior with McCourt. One could easily see this all as a leveraging move in bankruptcy court (“Look how much the value of the club has increased under my watch”). Of course, the bankruptcy court could say that with that much interest, what is really needed is an auction, in which case you get something similar to what happened in Aug of 2010 with the Texas Rangers.

Those close to the situation say that McCourt was to make the letter from Burke available to the league, but as of this morning, that had not yet occurred. The league, one can imagine, isn’t going to be able to say one way or another on how the deal looks, but from the outside, it’s suspect, at best.

Over a billion dollars in cash would take care of Frank McCourt’s problems. Surely, his former wife Jamie isn’t going to fight it. If there’s one thing that the news yesterday revealed it’s that Frank McCourt seems willing to entertaining the sale of the club… or is he? After all, the sale deal doesn’t list Dodger Stadium as part of the proposal. One can’t imagine the league going for any sale without the entire deal having McCourt fully exiting. In other words, chances of this deal happening are exceptionally low.


Maury BrownMaury Brown is the Founder and President of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey, and is a contributor to Forbes SportsMoney blog.. He is available as a freelance writer. Brown's full bio is here. He looks forward to your comments via email and can be contacted through the Business of Sports Network (select his name in the dropdown provided).

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