Take my team ... please!

Suddenly, it's a buyer's market for sports franchises

Owning a sports franchise used to be a can't-lose proposition. Sure, some owners fussed about day-to-day operating losses, but when it came time to cash out somebody else was always eager to buy your team -- often at ridiculously inflated prices.

Suddenly, all that's changed. Faced with a soft economy, bankruptcy filings and the prospect of a war in Iraq, the sports franchise market is at its lowest point since the 1970s. More than a dozen owners are trying to unload teams, and sports investment bankers suggest an equal number of pro franchises are quietly being shopped.

“It just mirrors the rest of the economy," says Sal Galatioto, head of the Lehman Brothers’ sports division. “This isn’t the bubbly, crazy market we had two years ago when all these asset classes were flying off the shelve and everybody’s net worth was doubling every six months. You had all these Internet millionaires or bogus millionaires running around."

Almost a third of the NHL franchises are available, according to investment bankers. The financially troubled Buffalo Sabres are reportedly being sold for about $50 million, the Ottawa Senators for $85 million -- with the new arena thrown in. This just after the NHL in 1999 sold expansion rights for $80 million apiece to Atlanta, Nashville, Columbus and Minnesota.

All three Major League Baseball teams owned by media titans are on the block -- the Anaheim Angels (Walt Disney Co.), the Atlanta Braves (AOL Time Warner, which also owns SI.com) and the Los Angeles Dodgers (News Corp.). “The friggin’ world champions (Angels) have been on the market for a year, what does that tell you?" said one baseball executive.

Former sports executive Dave Checketts is the front person for a group negotiating to buy the Dodgers, which have also drawn the interest of Japanese investors. Meanwhile, Lehman Bros. has accepted bids on the sale of the Angels, with the Nederlander entertainment group seen as the favorite to land the Disney franchise. Industry experts are watching carefully to see if, as expected, a bid on the world champions is negotiated within the next two months.

“If that doesn’t happen, it tells you there is some trouble," says John Moag, chief executive of Moag & Co., a Baltimore-based sports investment firm. “What happens with the Angels and Dodgers is going to tell us a whole lot [about the market]."

Moag is best known for bringing an NFL franchise back to Baltimore, but he also represented the NBA in the $300 million sale of the Charlotte franchise rights in December to Robert Johnson, founder of Black Entertainment Television.

Most recently, Moag spent two days in Atlanta perusing the books of AOL Time Warner's three Atlanta franchises -- the Braves, Hawks and Thrashers -- on behalf of prospective clients. He indicated a number of people are interested in the teams, suggesting it’s unlikely any single party would look to purchase all three. They've been valued at more than $700 million, although industry sources say $600 million to $650 million is a more realistic price for all three in this economic climate.

“It is arguably the largest and most exciting sports asset available," Moag said. “Can one [party] buy the whole thing? I don’t know, it is very expensive."

Brad Turell, a spokesperson for Turner Broadcasting, the AOL Time Warner division that includes the sports teams, has confirmed that several parties are interested in them.

Galatioto, who is handling the sale of the Angels and represented Johnson in his purchase of the Charlotte expansion franchise, told SI.com that Lehman Brothers also intends to look at the Atlanta franchises on behalf of clients. He discounted the possibility, however, of Johnson being a potential buyer, saying the BET mogul is more interested in bringing a franchise to the Washington, D.C., area.

Among those continuing to evaluate NBA possibilities is a Boston group that includes Larry Bird. That group, which finished second in the Charlotte bidding, was far more interested in the expansion team than the Hawks or the Milwaukee Bucks (on the market for $170 million) because of a sweet lease deal, no past contracts and an anticipated low payroll.

While AOL would prefer to sell its franchises as a single package, industry sources believe it is most likely that the Braves will end up being sold separately and the two winter sports in tandem.

These same sources say club owners in general might be better served waiting out the economic downturn before selling, but AOL Timer Warner is publicly committed to purging its sports assets. Chief Executive Richard Parsons has said the media company is considering selling the sports franchises as part of an broader effort to reduce its debt to about $20 billion (from $25.8 billion) by the end of 2004.

“We’ll do whatever works out best for the stockholders of AOL Timer Warner," said Turell. “If Dick Parsons’ goal is to raise money to reduce the debt, then it would be our goal to raise as much money as we possibly can. And that would be to sell all the teams to one buyer. But that all depends on the buyer and their interest level in all the sports. It may go that the winter sports and the arena go to one group and the baseball team goes to another."

The Braves, unlike the basketball and hockey teams, are viewed as capable of attracting an A-level price in the $250 million to $300 million range -- even more if a regional sports network is part of the deal. As bad as the market has turned, marquee franchises such as the New York Mets, Boston Celtics and Boston Red Sox have still managed to fetch top dollar, the Red Sox going for $360 million.

“You look at the Braves being the winningest team in the '90s, a brand new stadium, a national TV audience -- to me that is a premier franchise," said Steve Greenberg, a managing partner at the investment bank Allen & Co., which has been hired to assist in the sale of the Dodgers and Bucks.

Surely, there are potential buyers out there kicking the tires. Those bullish on sports investments, such as Moag, swear that franchise investments have never failed to exceed the stock market in terms of compound annual growth and probably never will.

The difference now is that it’s taking longer to sell these pro clubs. Even the World Series champions, Rally Monkey included.

Mike Fish is a senior writer for SI.com.

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