Who will it be for AEG?

By Roger Vincent, Walter Hamilton and Andrew Tangel
Los Angeles Times
Published: September 19, 2012

The surprise announcement that billionaire Philip Anschutz is putting his sports and entertainment empire up for sale sent potential buyers scrambling to launch bids that insiders say could reach $7 billion or more.

The big question on everyone’s mind: Who can pony up enough cash to buy such marquee properties as Staples Center, L.A. Live and the Los Angeles Kings?

A likely scenario is a group of investors similar to the consortium that bought the Dodgers — deep-pocketed private equity firms combined with sports and entertainment experts and a celebrity frontman. Los Angeles billionaire Patrick Soon-Shiong has already expressed interest, and well-known names such as Mark Cuban and powerhouse Santa Monica investment firm Colony Capital are seen in the running.

Potential bidders are pining for what could be the biggest deal of its kind, and a chance to be the hero who brings pro football to L.A. after an 18-year drought.

“In the world of sports this might be the greatest crown jewel of them all,” said John Cushman, chairman of real estate brokerage Cushman & Wakefield. “This is a huge deal for whoever wants to get into the game.”

A “healthy number” of potential bidders already have expressed interest since the sale was announced Tuesday, including wealthy individuals, private equity firms, foreign-government investment funds and pension plans, said a person familiar with the matter.

AEG has indicated privately that it expects to sell for $5 billion to $7 billion, but no official price has been set. The company also holds a minority stake in the Los Angeles Lakers.

“This is your one chance to buy a piece of one of the most iconic franchises, the Lakers, to own the Stanley Cup champion Kings, the Galaxy with David Beckham,” said Michael Rapkoch, president of Sports Value Consulting.

A sale is likely to follow the template used in the record-breaking deal for the Los Angeles Dodgers this year. Basketball legend Magic Johnson joined baseball specialists and private equity giant Guggenheim Partners to secure joint ownership of the baseball franchise for $2.15 billion.

The list of potential buyers for AEG is deep. First out of the gate was Soon-Shiong, part owner of the Lakers, who said Tuesday night that he is “clearly” interested.

Colony Capital also is expected to make an offer, according to a person familiar with the process. The investment firm manages $27 billion in assets and is considered to be an influential player in financial circles. Its chairman, Tom Barrack, keeps an intentionally low profile, though he was part of an unsuccessful bid to buy the Dodgers this year. It declined to comment.

Barrack, a former USC rugby player, has led Colony to invest in such properties as a French soccer club and a Japanese baseball club, with significant real estate surrounding the sports venues.

Another logical contender is Madison Square Garden Co., which bought the Forum this year and embarked on a $50-million renovation of the former home of the Lakers and Kings to turn it into a concert venue.

But with a market capitalization of $3.1 billion, MSG would be too small to buy all of AEG by itself, said Laura Martin, an analyst at Needham & Co. MSG declined to comment.

A wild card could be Guggenheim Partners, the financial company that leveraged some of its more than $160 billion worth of assets into buying the Dodgers. The Chicago financial services company outbid its closest rival by more than $500 million, and recently bought Dick Clark Productions.

Dodgers President Stan Kasten once served simultaneously as president of major league baseball’s Atlanta Braves, the Atlanta Hawks of the NBA and the Atlanta Thrashers of the NHL.

On Wednesday, Kasten declined to say whether Guggenheim executives had asked him about the feasibility of owning and operating multiple sports franchises.

In coming weeks, potential buyers are to receive key financial information about AEG and its assets. Competitors will be vetted in coming months by AEG’s banker on the deal, Wall Street giant Blackstone Group, which also helped orchestrate the Dodgers sale.

Blackstone and Anschutz expect to have a deal in place by the first half of next year.

AEG’s sale announcement caught many off guard because it is in the final stages of negotiating city approval to build a football stadium near Staples Center and woo an NFL team to play there.

Anschutz Co. said the sale fits its business strategy of building successful companies and then selling them when the time is right.

“This was choreographed and well-planned,” said Steve Soboroff, who worked with Philip Anschutz on the massive Alameda Corridor transportation project in the 1990s. “I believe that these guys determined that the announcement would increase the value of company, improve their chances with the National Football League and improve their chances with the city of Los Angeles.”

Stan Ross, a prominent real estate accountant who has worked with Anschutz in the past, said the billionaire might also be making a calculation that the nation’s tax structure could change after the November election.

“Different tax rates could make a substantial difference where you’re talking about this kind of money,” said Ross of the USC Lusk Center.

Also, there are many large investors with deep reserves of cash looking for secure investments, Ross said.

“These are trophy-type assets with cash flow,” he said. “The timing is really right to capture their value.”




Times staff writers Bill Shaikin and Joe Flint contributed to this report.
Copyright © 2012, Los Angeles Times


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