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Trick play

13 October 2020 By Anna Szymanski, Lauren Silva Laughlin

Billy Beane may be throwing a curveball. The baseball executive who used analytics to identify underpriced talent may help take the Boston Red Sox baseball franchise and Liverpool Football Club’s holding company public. Paying up for marquee names using an alternative financing vehicle in the midst of a bubble doesn’t exactly sound like the bargain hunting that made Beane famous. But the game plan might hit a sweet spot.

Sports valuations have been on a streak as of late, according to Forbes, even though the pandemic has cut into ticket sales and TV viewership has recently dwindled. Last month hedge fund star Steven Cohen set a record buying baseball’s New York Mets at a $2.5 billion valuation.

And on the face of it, Beane’s deal is on steroids. The check that he could write through RedBall Acquisition, a listed special purpose acquisition company he co-chairs with Gerald Cardinale of RedBird Capital Partners, would value billionaire owner John Henry’s holding company, Fenway Sports, at $8 billion, according to the Wall Street Journal. Valuing Liverpool’s sales for the year ending May 2019 on Manchester United’s modest 4 times enterprise value-to-sales multiple implies the Red Sox and a few ancillary properties would be worth double the price of the Mets. Even a diehard Boston fan would have to balk at that.

Yet U.S. valuations make the deal look more reasonable. Madison Square Garden Sports, the parent company of the New York Knicks and New York Rangers, has an enterprise value of roughly 6.4 times revenue, already one-third lower than before the pandemic. If that could be applied to Liverpool, the implied value of the Red Sox in the possible SPAC deal would be under $4 billion. Switch up to MSG’s pre-Covid valuation multiple and the Red Sox would only need to be worth $2 billion to justify Beane’s price.

If that type of international arbitrage doesn’t materialize, Beane and Henry could have another trick up their sleeve. If a deal with Beane’s SPAC gives Fenway Sports U.S.-listed shares, the company could use that currency to roll up European soccer teams that are cheap, relatively speaking. As they say in baseball, you have to swing for the fences.

 

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