March 30, 2005
Pachyderm Purchase
Baseball approved Lewis Wolff as the new owner of the Athletics today. I can't believe how little the franchise is worth:
The A's, who planned a news conference back in Oakland in the next couple of days to formally introduce Wolff as the new owner, hoped to have everything complete by Monday's season opener in Baltimore.
Wolff, the team's vice president for venue development, and his group are paying about $180 million to purchase the team from Steve Schott and Ken Hofmann, co-owners since jointly buying the A's in 1995.
As Schott and Hoffmann paid $90 million for the team in 1995, that's a pretty good ten year return on investment. I think $180 million is a steal for a team of this caliber.
Mr. Wolff will continue the tradition started by the Haas family of having double letters in the owner's last name.
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Posted by David Pinto at
06:53 PM
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Egad! That's actually a pretty medicore return: appx. 7%/year on average. Same money invested in the S&P 500 index on Jan 1, 1995 would have been worth $237.5M Jan 1, 2005 (which corresponds almost exactly to the 10%/year return you hear quoted oh-so-often wrt the stock market). Though I certainly agree---it seems like the team should be worth more than $180M!
Jason
I appreciate the analysis, & I could look up profits
from other recent deals. But, do we know how much
money the previous owners took out of the team in
the form of often used favorable tax treatment &
untold other perks? I'm not sure why you used Jan.
1 of this year as your end date, unless that's the day
the price was agreed upon. The S&P has gone down
since Jan. 1 of this year.
The real return to the owners should be measured by calculating the actual flows of cash (and non-cash benefits) over time. Don't forget that if the purchase was financed with debt at some level (say 50%) and the debt was the same at the time of the sale (unlikely), the return on equity would be 11.6% per year -- before any distributions that may have been made over time.
susan: I just picked a cononical date that would be easy to get prices for this year and 10 years ago; dumb luck that the return was right around the long-term return of the market. There certainly are other benefits to owning a baseball team; if I had a few hundred million dollars, I wouldn't mind spending $90M on a team knowing that my simple ROI would be significantly less than other investments :-)
Capitalist: I certainly could be wrong, but my educated guess is that very little of the cash the A's produced went into the owners' pockets, so I think it's fair to base (cash) ROI simply on purchase & sales prices. Oh, and there's no reason you couldn't boost the S&P 500 return using debt...
I don't have the extra cash to buy a team either, but the case has not been established that the ROI
would be greater or lesser than any other invest-
ment. And, there are many other variables so sig-
nificant in a case like this, that actual cash returns
could be substantially higher. No baseball owner
will offer this info to you, however. I'm just thank-
ful that my favorite team is not owned by a group
of investors whose #1 goal is to earn profits for
themselves (as so stated by the owners of the
Seattle Mariners).