News & Analysis

driven by the PitchBook Platform

This day in buyout history: Magic Johnson and the Los Angeles Dodgers meet PE

Seven years ago this March, Guggenheim Partners teamed with Magic Johnson on a $2.3 billion takeover of one of the most famous franchises in professional sports.

Yesterday marked the beginning of the 2019 season for the Los Angeles Dodgers. Today, meanwhile, marks the seventh anniversary of a day when the franchise began a new chapter in a history that includes some of the biggest names and most famous games in the history of baseball.

To do it, the Dodgers needed the help of an all-time legend from a different sport—not to mention over $2 billion in private equity dollars.

On March 29, 2012, the Dodgers announced that former owner Frank McCourt had sold a controlling stake in the team to a group headlined by Earvin “Magic” Johnson and Guggenheim Partners, a financial behemoth that dabbles in investment banking, asset management and several other financial sub-sectors in addition to private equity. The price was $2.15 billion, comprising $2 billion for the team itself and $150 million for a stake in the land surrounding Dodger Stadium, resulting in a total enterprise value for the Dodgers of $2.3 billion.

At the time, it was the most money ever paid for a professional sports franchise by a wide margin, according to Blackstone, which supplied financial guidance to the Dodgers on the deal. And in terms of on-the-field results, it’s proven quite beneficial. In the seven years since Guggenheim helped purchase the Dodgers, the franchise has gone a combined 651-484 with six division titles, four appearances in the NLCS and trips to the World Series in both 2017 and 2018.

But it certainly hasn’t all been smooth sailing. Last year, reports emerged that Guggenheim Partners and founder Mark Walter faced a lawsuit that accused the firm of defrauding and deceiving investors in one of its insurance companies to repurpose hundreds of millions from the insurance affiliate for other uses—such as buying a baseball team. Regulators eventually cleared Guggenheim, but The Wall Street Journal reported last November that Walter, Magic Johnson and others affiliated with the Dodgers deal had pledged more than $20 billion in personal assets to protect policyholders should the arrangement run into trouble.

The past decade-plus has brought an influx of private equity into the world of professional sports ownership—although more often than not, it’s individual investors buying stakes rather than their firms. Apollo Global Management co-founder Joshua Harris is the main owner of the NBA’s Philadelphia 76ers and the NHL’s New Jersey Devils, with Blackstone’s David Blitzer joining him as a co-owner. Apollo and Ares Management co-founder Tony Ressler owns the NBA’s Atlanta Hawks. Tom Gores of Platinum Equity controls the NBA’s Detroit Pistons. Tom Dundon of Dundon Capital Partners owns the NHL’s Carolina Hurricanes and recently committed $250 million to the upstart Alliance of American Football.

Perhaps unsurprisingly, all that investment has come at a time when franchise valuations are skyrocketing. The $2.3 billion Guggenheim paid for the Dodgers is still quite the chunk of change, but it’s not outrageous anymore. Former Microsoft chief executive Steve Ballmer plunked down a reported $2 billion for the Los Angeles Clippers in 2014. The 76ers, which Harris & Co. paid $280 million for in 2011, are now worth $1.65 billion, according to the latest Forbes estimates—and that only ranks 12th out of the league’s 30 teams. Rumors have circled in recent months that James Dolan could pursue a sale of the New York Knicks, with an asking price of some $5 billion.

The Dodgers aren’t quite at that level, but seven years down the line, Guggenheim’s investment sure looks savvy. Forbes estimates that the franchise is today worth $3 billion, more than any team in the sport other than the New York Yankees.

Join the more than 1.5 million industry professionals who get our daily newsletter!