The Middletown Press (Middletown, CT)
Ownership rules may be limiting bidders
More than three months after Daniel and Tanya Snyder announced they had hired an investment bank to “consider potential transactions” regarding the Washington Commanders, no bidding war has erupted for the storied NFL franchise.
Josh Harris, co-founder of Apollo Global Management and owner of the NBA’s Philadelphia 76ers and NHL’s New Jersey Devils, is one of at least two potential buyers to have toured the team’s training facility in Ashburn, Va. according to people close to the situation. At least two groups have submitted initial proposals to Bank of America Securities, which is handling the process that could lead to a full or partial sale of the team, according to two people familiar with the proceedings.
While the reasons for the seemingly languid pace of a potential sale aren’t clear, it could suggest the desired price — some believe Snyder is seeking as much as $7 billion — simply isn’t doable for many would-be buyers under the NFL’s rules for team ownership, the most restrictive in sports.
Those rules require the lead investor of an NFL ownership group to have at least a 30-percent equity stake in the purchase (nearly $2 billion if the Commanders sell for $6.5 billion). No ownership group can exceed 25 people, including
the lead investor. The group can’t borrow more than $1.1 billion to buy the team. And no private equity firms, public corporations or sovereign wealth funds can own any share.
To date, the NFL hasn’t had trouble finding individual buyers to meet its conditions. Walmart heir Rob Walton, the 12th-wealthiest person in America with an estimated net worth of $60.6 billion, according to Forbes, led the group that submitted the winning bid of $4.65 billion for the Denver Broncos, the most recent NFL team to be sold, last year. Before that, billionaire hedge-fund manager David Tepper, currently worth an estimated $18.5 billion, bought the Carolina Panthers for $2.275 billion in 2018.
Nonetheless, there are multiple reasons the league may consider loosening its ownership requirements sooner rather than later. For starters, the rapid escalation of NFL franchise values limits the pool of potential
buyers with sufficient financial wherewithal. Moreover, the NFL’s rules more sharply limit the pool of potential Black bidders, undercutting the league’s stated interest in diversifying its ownership ranks. None of the 32 NFL teams has ever had a Black owner.
In December, league officials suggested that team owners consider the current ownership policies and whether any changes should be made in the future, according to a person familiar with the situation. That could include allowing private equity firms to buy a limited stake in NFL teams.
“From time to time, the membership will review its ownership structure policies,” NFL spokesman Brian McCarthy said.
An exclusive club
In 2000, the NBA loosened its ownership rules to welcome private-equity firms as limited investors, with an eye toward broadening its pool of potential buyers. Major League Baseball did so in 2019; the NHL followed suit in 2021.
With that, a previously untapped source of billions in potential sports investment emerged. Arctos Sports Partners, among the major players in the space, reportedly boasts $3 billion in assets and has ownership stakes in the NBA’s Golden State Warriors and Sacramento Kings, as well as the Boston Red Sox Fenway Sports Group and Los Angeles Dodgers, among other teams.
More recently, the NBA further relaxed its ownership policy to permit sovereign wealth funds to buy limited shares in teams, setting a 20-percent cap on any single fund or investment firm’s stake in a given team. No more than 30 percent of a single team can be owned by a combined group of funds.
Thus far, NFL owners have steadfastly opposed private equity, generally viewing their restrictive requirements as a badge of prestige rather than a business impediment.
Of the NFL’s 32 owners, 10 are among Forbes 150 richest Americans, each with a net worth of more than $6 billion: Walton (Broncos), Tepper (Panthers), Jerry Jones (Dallas Cowboys), Stan Kroenke (Los Angeles Rams), Stephen Ross (Miami Dolphins), Shahid Khan (Jacksonville Jaguars), Robert Kraft (New England Patriots), Arthur Blank (Atlanta Falcons), Terry Pegula (Buffalo Bills) and Steve Bisciotti (Baltimore Ravens).
But the NFL’s rules are exclusive to the point of being anti-competitive, some observers contend. Michael McCann, founding director of the University of New Hampshire’s Sports and Entertainment Law Institute, said there is a strong financial incentive in allowing private equity to help fund purchase offers, as the NBA has.
“The big advantage for NBA ownership is that as a whole, it draws in more prospective bidders, which in turn should increase the sales price,” said McCann, who is also Sportico’s senior sports legal reporter. “It’s like selling a house: You want to get more people to bid and have another round of bidders.”
Barriers to entry
Though Black athletes account for 58 percent of NFL rosters, the league has no Black owners among its 32 teams and just two minority owners: the Jaguars’ Khan, who is Pakistani, and the Bills’ Kim Pegula, who was born in South Korea and co-owns the team with her husband Terry.
The league and owners approved a resolution last March endorsing diversity in franchise ownership. When Walton’s group announced in June that it had reached an agreement with the Pat Bowlen Trust to buy the Broncos, it also said that it had added a prominent Black business executive — Mellody Hobson, the coCEO of Ariel Investments — as an investor. In July, the month before the transaction was ratified by the owners, the group added Condoleezza Rice, the former secretary of state.
The Fritz Pollard Alliance, the diversity group that works closely with the NFL, said the league and owners must add specifics to their expression of support for minority ownership.
“We recognize how impactful ownership would be in terms of diversity,” Rod Graves, the group’s executive director, said. “But if we’re going to get there, then what are our goals? … It’s not enough to say, ‘We’re open to diversity in those areas.’ We need a commitment. And without that commitment, to me, we leave the opportunity for those objectives to be hollow. And I just believe that if the league is truly committed to diversity of ownership, then we need a true plan that outlines the details of how we’re going to get there.”
Charles Grantham, director of Seton Hall University’s Center for Sport Management, says change simply won’t happen until and unless the NFL changes its ownership requirements.
“These NFL franchise values have been increasing so much, it has essentially priced minority buyers out of the ballpark,” said Grantham, former executive director of the NBA Players Association in an interview. “It’s a supply-and-demand business, and so far, the NFL can demand” owners with vast individual wealth.