RedBird Capital Acquiring Ten Percent of Fenway Sports Group for $750 Million

soxhop411

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RedBird Capital is nearing a deal to acquire more than 10% of Fenway Sports Group for approximately $750 million, according to individuals familiar with the matter. The deal values the owner of the Boston Red Sox and Liverpool FC at more than $7 billion, according the people, who were granted anonymity because the matter is private. It would be the latest sports-related investment for RedBird, following the acquisition of Toulouse FC and the XFL, which is scheduled to relaunch in 2022.

RedBird founder Gerry Cardinale for some time has been trying to acquire a piece of Fenway, which is controlled by John Henry. Cardinale declined to comment. A SPAC led by Cardinale and baseball executive Billy Beane had been in negotiations to acquire a portion of Fenway earlier this year, in a deal that would have valued the company at $8 billion. Those talks ultimately led to the private investment by RedBird. The deal will likely close in the next six weeks. Red Sox executive Sam Kennedy didn’t immediately return an email seeking comment.
https://www.sportico.com/business/finance/2021/redbird-to-buy-fenway-sports-group-stake-1234623645/
 

bankshot1

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According to the article

"Fenway Sport Group boasts a portfolio of successful sports franchises. The Boston Red Sox have won three World Series this century and are a New England institution, drawing more than 2.9 million fans in 2019, more than 96% of its home field capacity"

Maybe if they won 4 they could have gotten a richer valuation!

I wonder if RedBird has options to boost their FSG stake (or right of first refusal) and how MLB views RB as holding stakes in competing enterprises.
 

mauf

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Minority stakes are typically discounted, so the parties presumably agreed on a pre-money valuation north of $6.75b.

In 2019, Forbes valued the Red Sox at $3.2b and Liverpool at $2.2b. Those valuations were obviously low, but imo the 60/40 ratio probably isn’t too far off. I assume the NASCAR team’s value is a rounding error relative to FSG’s total valuation.

https://www.forbes.com/sites/kurtbadenhausen/2019/07/22/the-worlds-50-most-valuable-sports-teams-2019/

So the Red Sox are worth somewhere in the $4-5b range. Maybe even more if the minority discount was steep.
 

tonyandpals

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Minority stakes are typically discounted, so the parties presumably agreed on a pre-money valuation north of $6.75b.

In 2019, Forbes valued the Red Sox at $3.2b and Liverpool at $2.2b. Those valuations were obviously low, but imo the 60/40 ratio probably isn’t too far off. I assume the NASCAR team’s value is a rounding error relative to FSG’s total valuation.

https://www.forbes.com/sites/kurtbadenhausen/2019/07/22/the-worlds-50-most-valuable-sports-teams-2019/

So the Red Sox are worth somewhere in the $4-5b range. Maybe even more if the minority discount was steep.
I know it's completely off topic, but wouldn't the 'discount' move the needle the other way, to a higher overall valuation?

For purposes of purely educating myself... all things equal in a 1bil company, a 10% stake is 'worth' 100mil. Because of the lack of control, and other factors that come with a minority stake, wouldn't you get that 10% stake at a discount, so less than the 100mil? You wouldn't pay a premium (greater than 10%) for less control. Am I missing something with that logic?
 

mauf

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I know it's completely off topic, but wouldn't the 'discount' move the needle the other way, to a higher overall valuation?

For purposes of purely educating myself... all things equal in a 1bil company, a 10% stake is 'worth' 100mil. Because of the lack of control, and other factors that come with a minority stake, wouldn't you get that 10% stake at a discount, so less than the 100mil? You wouldn't pay a premium (greater than 10%) for less control. Am I missing something with that logic?
You’ve got it right. Sorry if my writing wasn’t clear.

$750m is 10% of $7.5b, so the deal implies a pre-money* valuation of $6.75b before taking minority discount into account. If there was a 10% minority discount (which would be very low), the pre-money valuation would be $7.5b. If the discount was 20%, the pre-money valuation would be more like $8.5b. (A finance person can correct me if these numbers are wrong, as I’m not exactly sure if the numerator/denominator mechanics are right, but I’m comfortable they are directionally correct.)

So, for example, if FSG is valued (pre-money) at $8.5b, split 60/40 between the Sox and Liverpool with the NASCAR team valued at $100m, the Sox are worth about $5b. Whereas if you took the implied $6.75b pre-money valuation without accounting for minority discount, the Sox would only be worth $4b or so.


*- I’m operating on the assumption that the new $750m will be used to buy out existing owners, pay down debt, or for some similar purpose, rather than to fund some strategic initiative that will grow the value of the business, so I assume the difference between the pre-money and post-money valuation is $750m, not some greater number.
 

tonyandpals

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I understand now, thanks. It was my fault for confusing the overall valuation of FSG, when you clearly stated what you thought the Sox were worth. Seeing that # lower made me think you were going the wrong direction. Thanks for clearing it up!
 

Manramsclan

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What does this mean functionally for the Red Sox? Cash infusion?
I'm unfamiliar with RedBird and the Fenway Sports Group structure.