Pending approval by the court and MLB, the Los Angeles Dodgers have been sold for a record $2.15 Billion to a group that includes former Los Angeles Lakers & NBA great Earvin “Magic” Johnson. Many in the media are spinning the purchase as a Magic Johnson led effort, but is this really the case? While it is not clear what percentage of the team Magic will own, it is clear that he is one of a few people who own a small stake in the team. Apart from Magic, there are at least two other people (Stan Kasten & Peter Guber) that have a minority ownership stake. The person that put up the big bucks was CEO of Guggenheim Partners, Mark Walter, who met with current owner Frank McCourt in New York on Tuesday to hammer out the deal. It has been stated that Walter will not be involved in the day-to-day operations of the team. It is almost certain that Kasten, a former baseball executive, will be heavily involved in the day-to-day.
So with this in mind, was the ownership group really”led” by Magic or is he just along for the ride? On the operational side, how much say will he really have as a minority stake holder? There is also no doubt that Magic will be the face of the Dodgers franchise. He is the most recognizable and charismatic sports icon that the Los Angeles area has ever seen. Magic’s involvement almost seems like a spokesperson deal, but that isn’t necessarily a bad thing. To get his magical smile and face as the front man for the franchise, he deserves an ownership stake. All I can say about that is, get your money Magic!
Now there is still a question whether the ownership group paid too much. Some sports economist are saying that the deal exceeds the value of the franchise by as much as $1 billion. To give an idea of why they are saying this, just about three years ago the Chicago Cubs sold for $845 million and the Miami Dolphins sold for $1.1 billion. The price paid to acquire the Dolphins was the record price for the purchase of a North American sports franchise until this Dodgers deal. Keep in mind that NFL teams have a higher value than other sports franchises in North America, so the Dolphins deal made sense. The world record for the purchase of a sports franchise was $1.45 billion paid for Manchester United 7 years ago.
Additionally, just about a year ago, Forbes valued the Dodgers at about $800 million. This made them the 3rd most valuable MLB franchise with the New York Yankees ($1.7 billion) and the Boston Red Sox ($912 million) taking the top two spots. So in about one year, the value of the Dodgers has almost tripled? Does this make the Yankees now worth about $5 billion? There also appears to be a need for Dodgers Stadium to undergo renovations that will cost an estimated $300 million. Even if the Dodgers sign a TV deal similar to the ones signed by the Los Angeles Angels and the Texas Rangers for an estimated $3 billion, that revenue stream will be eaten up to cover the costs of the purchase and in stadium improvements. It seems like the only one that made a great transaction here is McCourt.
Let’s just say that I hope that Magic isn’t too heavily invested in the team because these numbers don’t make sense. He has been one former athlete that has been smart with his money. I hope he can divest himself and be instrumental in bring a NFL franchise to Los Angeles. The NFL is where the money is.