MW After historic NFL investment, private-equity firm Ares is on the hunt for more teams
By Steve Gelsi
Private-equity firms have been allowed to invest in NFL franchises for the first time, as the high cost of running teams is requiring more cash
Ares Management Corp. remains interested in investing in other National Football League teams after its historic move to buy a 10% stake in the Miami Dolphins, a source familiar with the private-equity firm told MarketWatch.
The minority investment by Ares $(ARES)$ values the entire Dolphins franchise at $8 billion, the source said, and is part of an expected rise in private-equity investment in U.S. professional sports teams.
"The Miami Dolphins represent an iconic franchise with a deeply engaged fanbase, and Ares is honored to invest ... to support the team's long-term strategic goals," Mark Affolter and Jim Miller, Ares's co-heads of sports, media and entertainment, said in a statement.
Under ownership rules approved by NFL owners this past summer, teams may sell up to 10% of their franchise to multiple investors. Each individual stake must be worth at least 3% of the team.
Private-equity funds are allowed to own stakes in up to six teams, provided they follow rules aimed to limit information disclosure between rival organizations.
Errol Brown, counsel at lawn firm Haynes Boone who specializes in professional sports deals, told MarketWatch that the huge expenses of player salaries and infrastructure improvements for fans are driving NFL owners to seek outside investment.
Meanwhile, the appeal of the live sports is fueling interest from private-equity firms in such deals. Broadcast and ticket revenue for events like NFL games mostly continue to gain traction regardless of the state of the stock market or the broader economy, Brown said.
"Valuations continue to go up - the Dallas Cowboys are worth $9 billion," he noted. "If you're looking for returns on capital, sports continues to be the most viable and uncorrelated investment out there. It's not tied to interest rates or inflation."
Along with Ares Management's stake, Brooklyn Nets owners Joe Tsai and Oliver Weisenberg bought a 3% interest in the Miami franchise.
The NFL approved the sale of the Dolphins stakes at a league meeting on Wednesday, along with the sale of a minority interest in the Buffalo Bills to private-equity firm Arctos Partners and nine other investors including Rob Palumbo, co-managing partner of private-equity firm Accel-KKR.
The NFL marks the last major U.S. sports league to allow private-equity firms to invest in its teams, following Major League Baseball, the National Hockey League and the National Basketball Association.
Also read: NFL approval of private-equity money is logical first step toward much-needed capital, lawyer says
Sports-business lawyer Brown said owners of NFL teams see the value in selling some of their equity and using the money to build stadiums and maximize their properties.
"Some teams may be more resistant to it, but the rules are set up so existing control owners are still calling the shots," he said.
Arctos Partners, which is based in Dallas, said its investment in the Buffalo Bills follows its similar forays in the NBA, NHL, MLB, Major League Soccer, Formula One, Nascar and the English Premier League.
In August, the NFL cleared a select group of private-equity investors to bid on ownership stakes in its 32 teams, including Ares, Arctos, Sixth Street Specialty Lending Inc. $(TSLX)$ and a consortium comprised of Ludis Capital, CVC Capital Partners, Blackstone Inc. $(BX)$, Dynasty Equity and Carlyle Group Inc. $(CG)$.
-Steve Gelsi
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(END) Dow Jones Newswires
December 13, 2024 10:16 ET (15:16 GMT)
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