Science & Environment
NFL owners vote in favor of private equity investment;…
The NFL’s most exclusive club just let in new members.
At a special league meeting in Eagan, Minnesota, on Tuesday, National Football League owners voted in favor of allowing select private equity firms to buy up to a 10% stake of a team. Each fund or consortium will be able to do deals with up to six teams.
The vote passed with support from 31 of the 32 franchise owners. Cincinnati Bengals owner Mike Brown voted against the measure, according to a person familiar with the vote.
Kansas City Chiefs owner Clark Hunt led the special committee on ownership policy. He told CNBC’s Jim Cramer after the vote that the NFL has been considering such a move for upwards of 5 years and felt it was the right time for the league — though he acknowledged the 10% cap amounted to “baby steps.”
“The capital will be very helpful to teams as they look to grow their business and improve the fan experience,” Hunt said.
The initial approved firms include Ares Management, Sixth Street Partners and Arctos Partners, in addition to a consortium nicknamed “The Avengers” that includes Dynasty Equity, Blackstone, Carlyle Group, CVC Capital Partners and Ludis, a platform founded by investor and former NFL running back Curtis Martin.
The firms collectively have $2 trillion in assets and intend to commit $12 billion of capital to be raised (inclusive of leverage) over time, according to people familiar with the matter, who asked not to be identified to speak about terms that were not public. With at least four investor groups able to invest in up to six teams each, that works out to $500 million of added capital on average for each team that receives an investment.
According to the terms of the proposal, the minimum hold period for these funds will be six years.
“We thought it’s an opportunity for us to really change how some of the ownership groups have real problems with the illiquidity, they have big families and have to solve a lot of problems that are not usual,” New England Patriots owner Robert Kraft told CNBC’s “Squawk Box” on Wednesday. “And so we thought this was a great source of capital and could be done in a way that was very functional and wouldn’t affect the operation.”
Pending final approval, Arctos, one of the approved firms, would be the only firm approved to invest in equity across each of the five most popular major North American sports leagues.
“We are honored to be among the first private investment firms being considered by the National Football League as potential partners for their clubs and owners,” Arctos said in a statement. “[We] look forward to contributing to the League’s continued success.”
Ares said in a statement it was honored to be able to invest in “iconic football franchises.”
“The NFL has long engendered deeply loyal fanbases, innovative approaches to media and some of the most viewed and highest valued sports franchises in the world. We are excited for the opportunity to support the continued growth of NFL teams through Ares’ extensive investment experience and strong relationship networks in the sports, media and entertainment sector,” the firm said.
The investing consortium of Blackstone, Carlyle, CVC, Dynasty Equity and Ludis said in a statement: “We are pleased to have secured this provisional approval following the NFL’s thoughtful and robust process, and welcome the potential opportunity to partner with the league.”
Private equity in sports
The approval Tuesday comes after years of discussion.
NFL Commissioner Roger Goodell told CNBC in July that the league had seen tremendous interest from private equity.
The league created a committee last September to look at the possibility of welcoming private equity funding and has been meeting with the selected firms more recently.
The NFL is the last major sports league to allow private equity investment, and it’s still treading lightly on the issue by allowing only a select group to participate and at a lower rate than the other professional sports leagues.
The National Basketball Association, Major League Baseball, the National Hockey League and Major League Soccer all allow private equity ownership of up to 30%.
Goodell told CNBC in July that he believes the 10% is a complement to the existing ownership structure and that the percentage could be raised at some point in the future.
As NFL team valuations rise, it’s meant a smaller pool of owners have the money to foot the price tag when teams become available.
That dynamic was on display during the sale of the Washington Commanders last year. The franchise sold for a record $6.05 billion to an ownership group that included Apollo co-founder Josh Harris and 20 other investors.
Harris said in June that the process “created a little bit of a wake-up call at the NFL.”
“Unless you’re one of the wealthiest 50 people [in the world], writing a $5 billion equity check is pretty hard for anyone,” Harris told CNBC at the CNBC CEO Council Summit at the time.
As the NFL opens its doors to fresh capital, the money will also free up funding for new stadiums and related projects.
“It will give teams who are considering new or renovated stadiums access to a capital pool they haven’t had access to in the past,” Hunt said.
The Buffalo Bills and Tennessee Titans are both currently in the process of building new stadiums, while the Cleveland Browns, Chicago Bears and Washington Commanders are actively pursuing new stadiums in the future.
— CNBC’s Jake Piazza contributed to this report.
