A group that includes former Lakers star Magic Johnson and longtime baseball executive Stan Kasten agreed on Tuesday to buy the Los Angeles Dodgers from Frank McCourt for a record $2 billion.
The price would shatter the mark for a sports franchise, Stephen Ross paid $1.1 billion for the NFL's Miami Dolphins in 2009, and in England Malcolm Glazer and his family took over the Manchester United soccer club in 2005 in a deal then valued at $1.47 billion.
Mark Walter, chief executive officer of the financial services firm Guggenheim Partners, would become the controlling owner.
The deal, revealed about five hours after Major League Baseball owners approved three finalists for an intended auction, is one of several steps towards a sale of the team by the end of April. It is subject to approval in federal bankruptcy court.
"I am thrilled to be part of the historic Dodger franchise and intend to build on the fantastic foundation laid by Frank McCourt as we drive the Dodgers back to the front page of the sports section in our wonderful community of Los Angeles," Johnson said in a statement.
As part of the agreement, the Dodgers said McCourt and "certain affiliates of the purchasers" would acquire the land surrounding Dodger Stadium, including its parking lots, for $150 million.
"If they invested that much money, I'm sure they'll invest to get us a winner," said Tommy Lasorda, the Dodgers' retired Hall of Fame manager. "I wish them all the luck, and I admire them. I know both of them. I know Magic from the day he came into Los Angeles as a basketball player for the Lakers."
The acquiring group, called Guggenheim Baseball Management, has several other investors, among them Mandalay Entertainment chief executive Peter Guber, Guggenheim Partners president Todd Boehly and Bobby Patton, who operates oil and gas properties among his investments. Kasten is the former president of the Atlanta Braves and Washington Nationals.
"I am truly honoured to have partnered with such talented individuals and to be associated with the Dodgers organization," Walter said. "We look forward to building upon the legacy of the Dodgers and providing long-term stability to one of the most revered franchises in baseball."
The 52-year-old Johnson played 13 seasons for the Los Angeles Lakers, winning five NBA championships and three MVP awards.
He retired from the NBA in 1991 after being diagnosed with HIV, the virus that causes AIDS. He briefly came out of retirement during the 1995-96 season and had a short stint coaching the Lakers. Since leaving basketball, he has been hugely successful in business, investing in movie theaters, a production company and restaurants.
He has also been an activist in the fight against HIV.
Kobe Bryant, speaking after the Lakers' 104-101 victory at Golden State on Tuesday , said this about Johnson's group acquiring Dodgers:
"I'm upset he didn't cut me in," current Lakers' star Kobe Bryant said. "I'm going to have to talk to him about that."
McCourt paid $430 million in 2004 to buy the team, Dodger Stadium and 250 acres of land that include the parking lots, from the Fox division of Rupert Murdoch's News Corp., a sale that left the team with about $50 million in cash at the time. The team's debt stood at $579 million as of January, according to a court filing, so McCourt stands to make hundreds of millions of dollars even after a $131 million divorce payment to former wife Jamie, taxes and legal and banking fees.
Kasten is expected to wind up as the team's top day-to-day executive.
The other two finalists were:
- Stan Kroenke, whose family properties own the NFL's St. Louis Rams, the NBA's Denver Nuggets, the NHL's Colorado Avalanche and Major League Soccer's Colorado Rapids, and who is majority shareholder of Arsenal in the English Premier League.
- Steven Cohen, founder of the hedge fund SAC Capital Advisors and a new limited partner of the New York Mets; biotechnology entrepreneur Patrick Soon-Shiong; and agent Arn Tellem of Wasserman Media Group.
It remains to be seen whether Major League Baseball will challenge the deal in U.S. Bankruptcy Court in Delaware, where the case is before Judge Kevin Gross.
Under an agreement reached by MLB and McCourt in November, a private auction was to be held among the finalists and McCourt was to select the winner by Sunday. The sales agreement is to be submitted to the bankruptcy court by April 6, ahead of a hearing seven days later, and the sale completed by April 30, the day McCourt is to make the divorce settlement payment.
"This agreement with Guggenheim reflects both the strength and future potential of the Los Angeles Dodgers, and assures that the Dodgers will have new ownership with deep local roots, which bodes well for the Dodgers, its fans and the Los Angeles community," McCourt said in a statement.
The acquiring group would gain the ability to sell the Dodgers' local broadcasting rights starting with games in 2014. The Guggenheim group likely would use money gained from the sale - or form the team's own network with outside investment - and use those funds to pay down the acquisition debt.
"The amount of leverage is a big question," said Marc Ganis, president of the Chicago-based consulting firm Sportscorp, which is not involved. "The likely scenario is that they have a broadcasting deal in mind so that they pay up now and pay themselves down from a big broadcasting upfront payment.
"The problem with this strategy is that the more paid upfront by the broadcast deal, the less money is available for team operations. The more debt they take on, the more debt service is required, the less money that's available for team operations. With the only beneficiary being the man walking out the door. A challenging result that baseball tried to avoid."
The current record for a baseball franchise is the $845 million paid by the Ricketts family for the Chicago Cubs in 2009. In England, Malcolm Glazer and his family took over the Manchester United soccer club in 2005 in a deal then valued at $1.47 billion.
The Dodgers filed for bankruptcy protection in late June, just days before the team was expected to miss payroll. The filing came after baseball Commissioner Bud Selig refused to approve a 17-year agreement between the Dodgers and Fox's Prime Ticket subsidiary that would have been worth $2 billion or more. MLB feared McCourt would use about half of an intended $385 million cash advance to fund his divorce.
Los Angeles, who finished third in the NL West last season at 82-79, had just three sellouts and fell short of 3 million in home attendance in a full season for the first time since 1992. There was some concern among MLB officials about the financing of the Walter bid because some of the money was coming from insurance companies that are owned by Guggenheim. A person familiar with the baseball owners' teleconference Tuesday said several team owners voiced that during the call. The person spoke on condition of anonymity because MLB did not make any announcements.
"The problem there is a fundamental problem as you go into an auction, and that is the absolute reliance on other people's money," Ganis said. "It means a lot of regulators. It means either shareholders or, depending on which insurance companies it's coming from, the insured themselves."
Kasten was hired as legal counsel of the Atlanta Braves and the NBA's Hawks in 1976, and three years later became the NBA's youngest general manager at 27. He was promoted to president of the Braves and Hawks in 1986 and also became president of the NHL's Thrashers in 1999. After leaving the Atlanta teams in 2003, he became president of the Washington Nationals from 2006-10.
Dodgers general manager Ned Colletti had dinner with Kasten in Glendale, Arizona, the team's spring training home.
"He's very successful, very driven, relentless in his pursuit of excellence," Colletti said. "He's seen a lot and he's won a lot."
The Dodgers have won six World Series titles but none since 1988, when they were still owned by the O'Malley family that moved the team from Brooklyn to California after the 1957 season. Fox bought the team in 1998, then sold it to McCourt.
Colletti, whose baseball moves appear to have been constricted because of the team's financial problems, says the sale announcement brings "clarity."
"It's time to turn the page and move towards a new chapter in the history of the Los Angeles Dodgers," he said.