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.

17 thoughts on “Padres to sell for $600 million

  1. Not to mention every year this travesty continues to play out the price of a ballpark is slowly rising as well. So it would probably be over 1 billion by the time Oakland ever got around to building a ballpark (if they ever got around to it).

  2. I forgot, are we in the front burner now, or back burner?

  3. We’re on the front burner but they must be cooking us at a very slow simmer.

  4. Good info. on figuring the A’s approximate worth – ML – how do you explain the Dodger’s extremely high $2.2 bil. figure though though? A $1 bil. total cost for the A’s could be possible.

  5. Ugh. You had me all the way through this post, right up until the last sentence.
    .
    This is the perfect representation of why I don’t come to this site nearly as much as I used to. The first 99% is great, solid info that crunches numbers and discusses hypothetical situations, the reason I started coming to this site.
    .
    And then, that last sentence, which is exactly what’s gone wrong here. By adding your own editorial at the end, “Good luck, Knauss & Co…” you poison the rest of the entire post, whether spot on or not, because it becomes instantly clear where your bias is. As we’ve discussed previously, you obviously have that right, and I know you’ll continue. But did I miss the part where we all know who the “& Co.” is? Is it a multi-billionaire? Is it Knauss’ grandson with his lemonade stand money? Is it somewhere in between? If you knew that answer, please tell us, so we can then provide context to your “Good luck…” comment. Until you do that, those of us who aren’t in the bag for San Jose will just read that comment as belittling and petty, which is how this whole site is coming off a lot more often these days.

  6. JH510 – Nailed It.

  7. If we’re going to cry foul about ML assertions on how real or fake DKs interest is, can we at least have LGO, BBO, 510, SOS, WTF, ETC cliques to find out what happened in the DK/LW summit? Aren’t they at least curious what their white knight said?

  8. @JH510/JGMJ – You don’t have to read the site at all. I don’t give a rat’s ass. I invite you or anyone to put together a site that is as dedicated to this issue and regularly disseminates info and analyzes as much as this site does. Here’s the thing about the post: I called it at $600 million three months ago and I was right. Why? Because over the years I’ve gained a pretty decent understanding of this stuff.

    As for Knauss, I’d love to know more about his group but they won’t reveal themselves – except in bits and pieces through press conferences and the like. If you’re going to have a meeting with Wolff and then not say anything about it after the fact, you’re not helping fans, let alone sites like this. I’m not providing info that Knauss doesn’t already know. I’m giving you the facts. You do with them whatever you want.

  9. @duffer – I saw a tweet yesterday (can’t find it right now) in which Stan Kasten indicated that his group overpaid for the Dodgers by $600 million. It’s a bubble all right.

  10. Looks like Rosenthal was right. NBC San Diego is independently confirming that their sources indicate John Moores has already made his choice. The O’Malley’s are the next owners of the Padres pending negotiation of the specific sale price (and the check clearing this time unlike Moorad’s) and approval by MLB. Both seem likely since the O’Malley’s were in on the over billion dollar price tag of the Dodgers with their same ownership group, and the latter is even more likely given the family’s long history with MLB’s brass and the lodge.

  11. Good for the Padres. Now if only we could get the A’s stadium situation sorted.

  12. The stadium will never happen in Oakland because they have no money, there is corruption with in the city and police force, and they do not care about the A’s. The A’s are second class citizens even in their own city and I think it is a travesty. Four titles, what do they have to do? Lets hope San Jose can save us for the next 100 years. Oakland, you don’t deserve any team and should be absorbed San Francisco calling yourself East San Francisco. This will be best for everyone including you pathetic city counsel.

  13. JH510 writes “Ugh. You had me all the way through this post, right up until the last sentence.”……
    So ML is not supposed to draw any conclusions or pose any salient questions or use any sarcasm on his own site? And if he does it is proof of bias? He should just cut and paste from the AP or ESPN.com? That’s a preposterous belief that only points out your own bias. You simply don’t like what a VERY reasonable extrapolation of this story is (it’s a new A’s ballpark site!), so you dismiss it as bias. That is classic conformational bias behavior on your part. However, let’s try and take a fair look at the story and posting, and what it means to the A’s and a new ball park for them: It appears the approx. billion dollar price tag to keep them in Oakland is not in dispute. Next point, 1) Should Knauss have the question of needing 1 billion in private investment directed at him? Correct Knauss choose to insert himself into the fray and make himself the biggest $$$-clout-private citizen front man for keeping the A’s in Oakland. That question of the where the money will come from should be directed at him by his own actions 2) Is speaking of Knauss with sarcasm (in regards to a billion in private investment) unjustified? Let me answer it in two parts: A) a 1 Billion loan based in the A’s attendance history and revenue stream and B) after the fanfare of his initial speech, his new found silence.
    He absolutely has opened himself up to ‘ribbing’. He runs a billion dollar corporation. I don’t. However, for math as basic as this, we both can do the math equally. And charging higher ticket prices (and maybe counting on Mayor Quan selling visas) is no plan at all, it’s just a whole lot of non sense.
    And on an additional side note, what the Oakland Pols (and Oakland itself) do not need is another person making speeches that lack actionable substance and pie in the sky planning. The Oakland Pols have that well covered. There simply is way too much of that already. Knauss can either come out and talk substantive brass tacks spelling out a real plan with named people/entities and real/named financial backing….or he should shut his yap and stop looking like another worthless, grandstanding politician. IMHO, the whole Knauss thing was grandstanding. I’d bet his speeches/participation will wither as time goes on (he’s a business man, he can do math).

  14. @TW – ML totally has the “right” to opine as he chooses on his site. I’m pro-Oakland and i don’t think that last sentence is out of place. Sports franchises cost a lot of money these days (stadiums too!)
    .
    Lastly, the bar is always changing and these deals are full of unknown challenges that come up. We still don’t have all the details of Wolff’s plan. Just look at the new wrinkle in the 49er stadium deal:
    http://www.mercurynews.com/southbayfootball/ci_20926306/county-suddenly-yanks-30-million-tax-funds-from

  15. David, not much of a wrinkle. The team has already said it would eat the loss if the funds end up remaining stolen by the county (and that $30 million is a small fraction of the stadium’s $1.2 billion price tag). And the county may not even get to keep the funds they took back since the city and team will likely be suing the county over them anyway.

  16. David, If I gave the impression I was speaking to all Pro Oakland people, that was not my intention. I understand the passion of some of the Pro Oakland folks (see my post from ML’s previous posting from a few days ago) and empathize with wanting something that seemingly is 10 bridges too far.

    Regarding the cost, I agree, it is a lot of money no matter what. And SJ is not a done deal if/when MLB gives the OK. However, Oakland and SJ are in two hugely different places. And that is because of the largely clear financial plan for SJ and the largely non existent financial plan for Oakland.
    Yet even with SJ having done their homework and LW committed to financing the ballpark, LW will still need SJ to kick in millions on the periphery, LW/SJ Pols will need the SJ voters to say “yes”, and they will need to brush aside the subterfuge groups & legitimate groups legal challenges. So I don;t want to give the impression that SJ, again, is a done deal. It isn’t. But is on a scale of 1 to 10 (1 being a Mt Everest hurdle to overcome and 10 being all but a done deal), Oakland is a1 to 2 and SJ is a 6 to 7 (when not including TR issue). Again, the gulf between the two cities is in big part due to a mostly clear financial plan for SJ and a non existent one for Oakland.

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