If you’re like most sports fanatics, you’ve wondered just how profitable a Major League Baseball franchise can be. Unfortunately for sports business fans, the information is cloaked in secrecy, providing MLB owners with decades of leverage over both players and local governments in negotiations for billions worth of player contracts and stadium funding. Just this year, the MLB player’s union had a protracted battle with team owners over COVID-19 salaries, schedules, and other issues. As usual, MLB owners held their ever-present upper hand: Because they rarely, if ever reveal detailed financials to the public or union, no one knows the real value of the team.
If a new Special Purpose Acquisition Company (a “SPAC”) is successful with its plans, it might change everything for financial transparency in baseball.
The SPAC we are talking about is RedBall Acquisition Corp. (NYSE:RBAC), and it’s in talk to acquire a minority stake in Fenway Sports Group, the owner of the Boston Red Sox and Liverpool F.C., one of the UK’s top soccer teams. Fenway’s largest shareholder, John W. Henry II, could theoretically recoup the entire investment he made when he acquired the Sox and the Liverpool “Red” by selling a minority stake – somewhere between 20-25% of the $1.13B he paid for both teams ($660M for the baseball team in 2002 and $476M for the football club in 2010).
Shortly after the deal was approved by the shareholders and MLB owners association, this stake would become publicly traded on the NYSE.
Axios reported that the SPAC would contribute the $575 million it raised earlier this year and is seeking to raise between $800-900 million in a PIPE, to which Red Bird Capital Partner’s Gerry Cardinale intends to participate to the tune of at least a couple hundred million dollars.
If the plan goes smoothly, Fenway could receive up to $1.5 billion for the stake, while the general public would get a detailed look into the franchise financials for an MLB team. If MLB owners vote to block the transaction, it says volumes about their fears of exposure, and begs the question: Just how profitable is one of the premiere teams in the Major League?
