10 Jan 2012
- Written by Jack Humphreville
WHAT ARE THE DODGERS REALLY WORTH? - Prospective purchasers of the Dodgers are scheduled to submit their non-binding, preliminary indications of interest by the end of the week to the Blackstone Group, the New York investment bank that is running the auction for the sale of the Dodgers.
Numerous bidders have been mentioned in the press: Mark Cuban, the internet billionaire that owns the world champion Dallas Mavericks; New York hedge fund mogul Steve Cohen; Magic Johnson and friends; Rick Caruso, the owner of The Grove, and Joe Torre, the former manager of the Dodgers; investment manager Tony Ressler who also happens to be a minority investor in the Milwaukee Brewers; and Stanley Gold and the family of the late Roy Disney.
There has also been considerable speculation about how much the Dodgers are worth. Forbes ascribed a value of $800 million, while the press has reported numbers in the range of $1.2 billion. We have even read about valuations in the range of $1.6 billion to $2 billion, obviously helped by leaks from the McCourt camp.
Obviously, there is a lot to like about the Dodgers, our home town team for over 50 years. After all, they have won the World Series five times since moving to Los Angeles and have Vince Scully in the broadcast booth.
And what’s not to like about Chavez Ravine on a summer’s evening, especially when the Boys in Blue smack the Giants in front of a capacity crowd.
And despite all the controversy last year, the Dodgers played .594 ball after the All Star break. At that pace, they would have won the West and made the playoffs.
The Dodgers have also signed MVP runner up Matt Kemp to a long term contract on considerably better terms than the Angels did for an aging Albert Pujols. The pitching staff is anchored by left handed Clayton Kershaw, the Cy Young winner and strike out artist who will be only 24 on Opening Day.
Importantly, the Dodgers are in the nation’s second largest media market which is further enhanced by many more fans around the country.
However, the prospective purchasers did not get rich by overpaying for underperforming assets.
While the buyers no doubt recognize that the Dodgers are worth more without The Boston Parking Lot Attendant, the fact is that the Dodgers are not really profitable. And if you toss in interest expense and debt repayment, the Dodgers are a sea of red ink.
These operating and cash flow problems are magnified when you take into account that the Dodgers’ payroll is less than $100 million, or about $75 million less than the Angeles projected salaries next year.
This shortfall will be financed by the significant increase in the media rights fee, but only starting in 2013 unless the owner cuts a new deal with Fox Sports, the current owner of the media rights, despite Boston Frankie’s unethical attempt to break the current contract.
The new owner will also need to remodel or rebuild 50 year old Dodger Stadium so that it can accommodate very lucrative skyboxes that are an extremely important source of revenue for professional teams. And this, as we all know, is a very expensive project that will not be financed in any way by the City of Los Angeles.
But this brings us back to the issue of price and whether the proceeds will meet Boston Frankie’s expectations.
As it is, the Dodgers and The Boston Parking Lot Attendant have estimated liabilities in the range of $900 million.
This would include debt of the Dodgers; bank debt secured by the parking lots; deferred compensation to the likes of Manny Ramirez; any liability associated with the Bryan Stow beating on Opening Day; advances from Fox Sports; personal debts and mortgages on his various residences in Montana, Vail, and Cape Cod; attorney fees; recapture taxes; long term capital gains tax; and any payments and penalties due to the Internal Revenue Service and the State of California as a result of his overly aggressive tax positions.
And last, but not least, the $131 million payment to the lovely Princess Jamie who resides in her $50 million beachfront residence in Malibu.
So, are the Dodgers worth over $900 million?
The Dodgers are not making money, attendance was down 18% last year, and no shows were 25% of the ticket sales. The new owner will have to increase payroll by 75% to be competitive and Dodger Stadium will require a massive investment. Finally, the Dodger brand has been severely damaged by the gross mismanagement and corporate looting by Boston Frankie and his partner in crime, Princess Jamie.
The value of the Dodgers is also clouded by Boston Frankie’s desire to continue to own the 300 acres in Chavez Ravine, including the land under Dodger Stadium. His plan is to enter into a long term lease with the new owner on terms that are very favorable to him that may include future development rights. Not that he ever developed anything.
But this land lease presents two problems.
The first is who in their right mind would want to do business with the untrustworthy and highly litigious Boston Frankie, a wise guy who would always be scheming how to make a quick buck at your expense.
And secondly, a long term land lease would more than likely be considered debt by Major League Baseball, thereby limiting the new owner’s financing options.
Over the next several weeks, Boston Frankie and the Blackstone Group will determine who will make it to the second round of bidding, subject to Major League Baseball’s approval of each bidder’s financial wherewithal, business acumen, and reputation. Then qualified bidders will have access to significantly more information than was in the initial teaser presentation that was circulated just before Christmas.
The closing is anticipated before Opening Day. But this is a very aggressive timetable. The buyer must complete extensive due diligence and arrange financing for a team that is essentially losing money. And this is complicated by negotiations with a very difficult and slippery seller who wants to continue to own the land that would be encumbered by an onerous lease.
So will Boston Frankie continue to be a Major League jerk?
Without a doubt!
But given the financial pressures associated with the bankruptcy, the mounds of bank debt, and his time sensitive obligations to Princess Jamie, hopefully Boston Frankie will just be a bad memory and the Dodgers on their way to the playoffs.
Tags: Dodgers, LA Dodgers, Los Angeles Dodgers, Frank McCourt, Boston Frankie, Jamie McCourt, Dodger sale, Dodger worth, what are Dodgers worth, Matt Kemp, Clayton Kershaw, Jack Humphreville
Vol 10 Issue 3
Pub: Jan 10, 2012