By Thomas Heath
Washington Post Staff Writer
Tuesday, May 31, 2005
Major League Baseball will accept nine initial bids today for the Washington Nationals, launching a franchise sale that could last for months and bring up to $400 million, one of the highest prices ever for a baseball team.
Several bidders, who spoke on the condition of anonymity because MLB has asked them not to speak, said the serious money is expected to begin around $300 million and rise from there.
"There are several strong groups out there, and that's good news for baseball," said Andrew Zimbalist, a professor of economics at Smith College who writes and speaks about baseball. "When groups bid against each other, anything can happen. I could see prices between $350 million to $400 million."
Forbes magazine places the Nationals' value at $310 million, based on the wealth of the Washington market and the $535 million stadium project the city plans near the Anacostia River waterfront. On top of the profitability of the team is the heightened visibility and cachet of owning a franchise in the nation's capital.
"The prestige premium for the Washington baseball franchise, where the new owner would have so much visibility and access, could add upward of $50 million to the price of the franchise," said Marc S. Ganis, president of Sportscorp Ltd., a Chicago-based sports advisory firm.
Although there are no clear front-runners and a last-minute entry is possible, Zimbalist said he believes a few groups may have a slight edge, including former Atlanta Braves president Stan Kasten, who has a proven track record as a sports executive; Fred Malek and Jeffrey Zients, leaders of a District-based group favored by Mayor Anthony Williams; and local entrepreneur Jonathan Ledecky, a former partner in the Washington Capitals.
"We have been working hard on this for six years and plan to compete aggressively," Malek said.
But at this early stage, before bids are in, it's difficult to know how groups will jockey for position. Dan Snyder came out of nowhere to bid on the Redskins, then partnered with a New York billionaire to win the team for $800 million. After the NFL turned down Snyder's associate, Snyder resurrected the bid and won the team alone.
Something like that could happen here. Although money is a primary mover in a sale, Commissioner of Baseball Bud Selig likes owners he is comfortable with, who view the game through the same prism as he does. He likes owners who won't make waves or drive up player salaries by spending crazily. To fashion the group he wants, with a "point person" baseball will view as a welcome addition to team meetings, Selig will move his bidders like pieces on a chessboard.
"The bat is in baseball's hands," said Paul J. Taubman, head of mergers and acquisitions for Morgan Stanley, who has worked on many team sales, including the Redskins.
Washington's Lerner family, a local real estate dynasty, is very serious about purchasing the team and has hired top strategists, including Mike Shapiro of San Francisco, to help them; the team of Yusef Jackson and billionaire Ronald Burkle has the money to write a check, as does Franklin Haney Sr., a Tennessee-based financier and developer who has strong business ties to Washington; Alexandria businessman William Collins has been strengthening his group lately, including the addition of former Sen. Peter Fitzgerald (R.-Ill.).
Zimbalist said the price could reach $500 million if the sale includes baseball's portion of Mid-Atlantic Sports Network (MASN), a regional sports network owned by MLB and the Baltimore Orioles. MASN controls baseball's television rights in the mid-Atlantic region, including both the Nationals and the Orioles.
Cable giant Comcast is suing MASN to keep the games on Comcast SportsNet, which is keeping Nationals games out of millions of homes and could delay the sale of the Washington franchise.
"The Comcast lawsuit adds a level of difficulty to the transaction," said investment banker Sal Galatioto, who has handled several sports team sales. "They can go ahead and sell the team, but the problem is how the bidders react to the lawsuit. Will they be able to close the transaction with the lawsuit sitting out there? I'm not sure."
Asked if the lawsuit will delay the sale, MLB President Robert DuPuy answered, "We do not think it will."
Selig has said a new owner will be selected by the summer, and several baseball insiders would like to have the process settled by July's All-Star Game, but baseball moves slowly. The league originally hoped to have the bidding under way last December.
"We are looking forward to receiving the expressions of interest from the groups and moving the process forward to a prompt conclusion," DuPuy said.
Until the legal questions are resolved, baseball has asked bidders to submit two bids: one for the Nationals with an ownership interest in MASN, and one for the Nationals with no interest in MASN.
Right now, the Orioles own 90 percent of MASN and baseball owns 10 percent, with that number increasing to 33 percent over 28 years. Baseball, which paid the Orioles $75 million for the 10 percent, is likely to sell the new owner of the Nationals its interest in MASN along with the team.
The league purchased the Nationals, then known as the Montreal Expos, from Jeffrey Loria for $120 million in February 2002. The Expos lost millions under baseball's ownership, but this year the Nationals hope to turn a profit of up to $20 million in Washington, according to team officials.
"Baseball is anxious to get this done pretty quickly," Zimbalist said. "On the other hand, the Nationals are making a profit this year, so it's not super urgent. I don't know if this sale happens in two weeks, two months or a year."