Padres to sell for $600 million
Fox Sports’ Ken Rosenthal got the tip last night that the San Diego Padres are about to be sold. Three bidding groups have been pared down to two: the O’Malley family led by Peter Seidler, and Gary Jabara, with the O’Malley family reportedly in the lead.
The total price of the sale is expected to be $800 million, with $600 million for the team itself and $200 million for the Padres’ equity share of the recently launched Fox Sports Net San Diego regional sports network.
Jeff Moorad was supposed to be the owner, having negotiated a $530 million price a few years ago with a five-year phase-in of the acquisition. During the last offseason, it became clear that forces within MLB (the “Lodge”) were not going to approve the sale, so when combined with John Moores’ realization that he could get more thanks to the new TV deal, the Padres were pulled out from under Moorad (and minority partners such as Bob Piccinini).
Compared to this year’s Forbes valuation of $458 million, the combined $800 million sale price represents a 75% premium over the appraised value. Even when the TV component is separated out, the premium is 31%. In the wake of the Dodgers’ record-shattering $2.1 billion sale price, some sort of premium was to be expected, and I wrote then that $600 million for the Padres was a good starting point. The Padres serve as a good benchmark for any potential sale of the A’s, because the teams’ market dynamics are similar. San Diego represents the A’s if the A’s got a new ballpark and TV deal, thus the higher valuation ($458 million vs. $321 million).
All of this makes it fairly easy to project what the A’s would be worth on the open market. Lew Wolff has said unequivocally that the team is not for sale, but it’s still a worthwhile exercise – at least on the blog. If I apply the 31% premium to the A’s now, the new asking price is at least $420 million. That’s not going to be enough for Bud Selig, as one of his main responsibilities over the last decade has been to raise franchise sale prices on behalf of outgoing owners as much as possible. If he wasn’t able to lobby to get San Jose for frat buddy Lew Wolff, he’d at least give Wolff and John Fisher a massive golden parachute. It would be practically inconceivable to have any starting price be any less than $500 million. Add at least $500 million in private funding for a new ballpark (more depending on the site), and the cost to keep the A’s in Oakland becomes a cool $1 billion. That’s why I thought it curious when the fan letter to Fisher from the spring circulated, imploring the majority owner to either work to stay in Oakland or sell the team.
$500 million for the team, $500 million for the stadium. Those two parts are attached at the hip, because Selig wouldn’t approve any sale without a bulletproof (and underway) ballpark development plan. The problem with such a plan is that any future franchise sale price would be less than the combined $1 billion, because of the nature of the stadium financing. Building a new ballpark is like buying a new car and driving it off the lot – depreciation immediately kicks in. Since much of the ballpark revenue would be directed toward paying debt, it would reduce the attractiveness and market value of the franchise. Anyone who bought the franchise would be burdened by that debt until it was cleared 30, 40 years later – and that doesn’t even take into account debt incurred to buy the team. The same revenue/valuation drag goes for San Jose, except that at least Wolff/Fisher bought the team in 2005 for the relatively low price of $180 million, and they would presumably be able to service the debt better thanks to Silicon Valley’s economic strength.
So there you have it. $1 billion to keep the team in Oakland. Good luck with that, Don Knauss and company.