When the private equity firm Apollo Global Capital bought a minority stake in the entity that owns the New York Yankees for $2.6 billion, the size of the transaction raised eyebrows. Apollo's stake in the Yankees will come to 16%, per multiple reports. Major League Baseball had long capped the percentage a private equity firm could invest in a team at 15% but, as first reported by Forbes' Maury Brown, the league changed its rules this summer without any public fanfare.
The longtime owner of the NBA, NHL and WNBA teams in Washington, D.C., doesn't think that's such a good thing. "“It's probably the thing that I'm most concerned about right now," Ted Leonsis said on The Varsity podcast. https://podcasts.apple.com/us/podcast/teds-monumental-adventure/id1762692129?i=1000791238912 Leonsis didn't specifically criticize Apollo's latest sports investment, which valued the Yankees at more than $12 billion — the highest valuation ever for an MLB franchise. Rather, he believes the goals of private equity firms are misaligned with what he sees as the purpose of owning a pro sports team.
More news: MLB Changed Its Team Ownership Rules, and the $12B Yankees Took Advantage “When private equity came in to the business, I got very nervous, because first, for the most part, private equity, they're not managing their money," Leonsis told Puck's John Ourand. "They're managing someone else's money, and they're making fees, and they get paid annually, you know, percentage of what they've raised. And then, if they get a big win, they get a piece after they pay it back.
And sports teams, we don't look like investable assets, in that we don't worry about quarterly results.” While private equity is concerned with turning a fast profit, Leonsis said his time horizon is longer. More news: One MLB Stadium is About to be Renamed After 26 Years “Why are we doing it? Well, our fans deserve better services, and the unions want us to generate more dollars so that salary cap can go up, and you have a social responsibility to the city as well," he said.
"So there's a lot of drivers, if you will. And for us, owning the teams, if you've owned the team for a long time, like I have now, I look at some of the flipping that's going on, and I get nervous about it, right?” Leonsis specifically cited Mark Walter's sale of the Los Angeles Lakers in August to Bob Iger and Joshua Kushner for a reported $12.5 billion, one year after he agreed to buy the team for $10 billion, as evidence of the kind of rapid growth that makes him nervous — and perhaps only encourages PE firms to jump into the sports ownership business. Two other baseball teams, the San Diego Padres and Los Angeles Angels, sold majority stakes this year alone.
The Padres' valuation of $3.9 billion set a record in August, only to be eclipsed in September by Stan Kroenke's $4 billion purchase of the Angels in September. For more MLB news, visit Newsweek Sports.
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