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Friday, March 14, 2003
It's a buyers' market for prospective team owners

By Darren Rovell
ESPN.com

Soon after Broadcast.com founder Mark Cuban bought the Dallas Mavericks and a 50 percent share in the American Airlines Center in January 2000 for $280 million, the excited new owner experienced one of those quintessential dot-com boom moments.

Mark Cuban
Would Mark Cuban think twice about buying the Dallas Mavericks given today's economic state of sports?
Cuban was still holding what he calls "a small portion" of Yahoo! stock from the sale of his Internet audio site, and while checking his portfolio on the team bus, he learned that his shares had risen about $30 that day. Cuban immediately turned to the nearest person, center Shawn Bradley. "Hey Shawn, I just paid for the Mavs!"

It's not hard to understand why buying a sports team three years ago was such a challenge. Average Joes were making millions, companies launched their IPO's then watched as they surpassed the $100 per share mark, and those who grew fat in the wallets were sick of managing only fantasy teams.

Those that still have the desire and means to buy a sports team can step right to the front of line. With the dot-com boom now long gone and the economy on shaky ground, a group of owners want out of the sports business, but can't find suitable suitors to take the team off their hands.

"The absolute guiding principle of franchise values and turnover is the stock market," Cuban said. "When I bought my team the NASDAQ was at 5,000 and there were a lot of rich people salivating to buy one. Those times are over, but if the stock market bounces back, those teams will be snatched up right away because the passion value, the ego value and the fun value of owning a sports team is never going to change."

Sports investment bankers say there are at least six professional sports teams currently for sale, with another seven to 10 team owners ready to pack their bags should the right price comes along.

Media companies, citing an intension to return to its core business, are getting out. Fox is selling the Los Angeles Dodgers, which lost about $40 million last season. AOL Time Warner has the Atlanta Thrashers, Hawks and Braves on the block hoping to chip $700 million off the company's $25 billion in debt, and a wealthy businessman can buy the world champion Anaheim Angels from Disney, which might be interested in selling the Anaheim Mighty Ducks as well.

B. Thomas Golisano
Thomas Golisano found a bargain in the Buffalo Sabres, paying a reported $92 million.
The bargain basement values, reminiscent of prices in the mid-1980s, aren't expected to last long on the market. On Friday, after eight months of managing the Buffalo Sabres, the National Hockey League announced billionaire Thomas Golisano as the team's new owner. Golisano will pay $92 million for the team at a time when $80 million was the price tag for the four NHL expansion teams in 1999, and Golisano's deal includes the 6½-year-old HSBC arena. Next up are the Ottawa Senators, which became available after Rod Bryden's attempt to repurchase the team from bankruptcy court failed. Bidders interested in purchasing the Senators and the Corel Centre need to submit bids by April 3.

"For someone who has the cash and someone who has belief and vision, there are historic values out there," said Chuck Greenberg, president and CEO of PlayMaker Sports Advisors LLC, a sports finance advisory group. "But a lot more people are more comfortable paying a premium when things are going great than paying a discount when times are tough."

In the NHL, a possible labor battle on the horizon highlighted by the highest salary-to-revenues ratio in all of the major sports has buoyed speculation in the media that as much as one-quarter of the league's teams are for sale.

"A lot of numbers get thrown around and there's lot of speculation," NHL commissioner Gary Bettman said. "The fact is at the right price probably every team is for sale in every sport so people shouldn't make too much of the number of teams that are supposedly up for sale."

One of those "right price" teams is the Dallas Stars. Owner Tom Hicks, who also owns the Texas Rangers, said in September that he was considering selling the franchise and his 50 percent stake in the American Airlines Center should the right opportunity come along.

Even in this market, analysts say premium values still can be realized for premium teams. Much like the Red Sox sold for $700 million in December 2001, including the group's acquisition of the New England Sports Network, Fox could garner bids at more than $600 million if it is willing to throw in Fox Sports Net 2.

NFL franchises also would sell for top dollar because the league's intricate revenue sharing program annually provides each team with more than $70 million from the national television contracts. But only one team -- the Minnesota Vikings -- is loosely on the block thanks to its stadium financing struggles. Owner Red McCombs has said he expects to own the team at least through next season.

Bob Kraft
As owner of the New England Patriots, Robert Kraft has reaped the benefits of the NFL's lucrative TV deal.
"We in the NFL have been very fortunate, as I believe all of our teams are profitable and only one might be up for sale," New England Patriots owner Robert Kraft said. "But in my lifetime the economic situation has never quite been like this. A lot of people got into sports five years ago living off the wealth of the bubble and things now have recalibrated back. The U.S. lost about $7 trillion of wealth, so everybody's thinking a little differently."

In the NBA, the Hawks and the Milwaukee Bucks are for sale, and the Orlando Magic and Cleveland Cavaliers have been rumored to be on the market, as well. The Magic announced their intention to sell in January 2002, but they have since -- at least publicly -- decided to keep the team, while Cavs owner Gordon Gund has repeatedly denied his team is for sale.

"To say that the number of teams for sale means that the sports world is unhealthy is unfair," said Robert L. Johnson, the founder of Black Entertainment Television who purchased the NBA's Charlotte expansion franchise in December. "You've got to look at it on an individual team basis. I bought this team at the high water mark, but I think I bought into a market with a product and a strategy that's going to work."

Four Major League Baseball franchises are up for sale, including the Montreal Expos, which has been operated by the league since Jeffrey Loria traded the franchise for the Florida Marlins a year ago. Although league officials have said it wants to find the team a new home and owner by the All-Star break, they might not be able to even if there is a willing buyer and eager city.

That's because the federal racketeering and fraud case brought in July by 14 former Montreal Expos owners against former owner and current Marlins owner Jeffrey Loria as well as MLB commissioner Bud Selig and chief operating officer Bob DuPuy is still pending. "If they try to move the team, the judge has told us to file a preliminary injunction to stop them from moving and we intend to do that," said Jeffrey Kessler, a partner at Weil, Gotshal & Manges which represents the plaintiffs.

The economic state of sports ownership prompts at least one former baseball team owner to preach caution to the next generation of team owners.

... this is a very scary business to get into for the unitiated. Years ago, if you paid too much for the team or you overpaid players, you would always be saved by media contracts that seemingly doubled every four years. That's not happening anymore, so if you overpay and make bad decisions you're stuck.
Clark Griffith
"Owners might sell because they believe they can get better returns on their investment outside the game or they're sitting on huge capital gains and they want to take advantage of it," said Clark Griffith, who was part-owner of the Minnesota Twins from 1966-1984. "But this is a very scary business to get into for the uninitiated. Years ago, if you paid too much for the team or you overpaid players, you would always be saved by media contracts that seemingly doubled every four years. That's not happening anymore, so if you overpay and make bad decisions you're stuck."

Although the NHL's future financial state appears unstable with the Collective Bargaining Agreement and its U.S. national television deal both expiring in September 2004, Montreal Canadiens owner George Gillett says he is pleased with the new guard that is coming in.

"I think that what we are seeing in terms of new ownership the caliber and the capital structure is a substantial improvement to some of the things we've seen in the last 10 years and I'm very optimistic that sports in general is in a very healthy state," Gillett said.

Golisano has plenty of financial backing with a net worth of $1.2 billion. And so too does Eugene Melnyk, the lead candidate to purchase the Senators who has a net worth of $1.4 billion.

"I still do strongly believe that that we're going to survive," said Jerry Colangelo, managing partner of the Arizona Diamondbacks and Phoenix Suns. "I've heard the doom tales forever and the bottom line is we continue to progress we have our trials and tribulations but this industry has grown tremendously."

Darren Rovell, who covers sports business for ESPN.com, can be reached at Darren.rovell@espn3.com.