Diddy Wants To Be A Team Owner. Will He Buy The Knicks With An Investor Group For $5B?
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In 2017, Diddy said he wanted to buy the Carolina Panthers and become the first African-American owner of an NFL team after Panthers owner Jerry Richardson stepped down amid accusations of sexual harassment and using a racial slur.
The Panthers were valued at $2.3 billion at the time.
Diddy’s net worth in 2017 was $820 million, according to Forbes. That’s not enough to buy a team for $5 billion.
Teams often sell for more than their estimated worth, according to Sonenclar, who is managing director of NYC-based Oaklins DeSilva & Phillips LLC, an advisory firm specializing in merger and acquisition buy-side and sell side.
“Professional sports franchises live somewhat apart from other businesses in that they have historically enjoyed a constant upward value trajectory regardless of the underlying economics,” Sonenclar said in an email to Moguldom. “Can that continue uninterrupted forever? Common sense says no.”
Knicks owner Dolan is executive chairman and CEO of The Madison Square Garden Company and executive chairman of MSG Networks, overseeing all day-to-day operations of professional sports teams the Knicks, New York Rangers, and New York Liberty, as well as their regional sports networks.
“I would be very surprised if the New York Knicks were to come to market for sale anytime soon,” Channer told Moguldom. “The franchise is deeply intertwined into the corporate history of the Dolan family … Dolan (is) still active and healthy. If the Knicks did come up for sale, it would likely be in the $5 billion range.”
Not that’s that’s what the team is worth.
“The most obvious first question is what else is included with the Knicks? The team alone isn’t worth a fraction of $5B,” Sonenclar said. “So would a deal include MSG? The Rangers? The MSG cable network?”
Could Diddy make a run at purchasing the NY Knicks?
If the NY Knicks were for sale, Diddy would have the ability to pull together a credible bid, Channer told Moguldom. “He is wealthy enough to put an eight-to-nine figure stake needed to be a player. His network of business associates includes wealthy investors who could participate. If Diddy wanted to be the lead investor, he would likely need to put in over $100 million. Otherwise, he could be a visible and active co-investor.”
Regardless of the price tag, unless Diddy is plunking down the full purchase price himself and doesn’t care what the P&L is today or over time, he’s going to have outside investors who at some point will want out at a profit, said Sonenclar.
“So like any other deal in any other industry, it’s a question of forecasting cash flows and making intelligent assessments of where, in this case, the value of NBA franchises are going,” Sonenclar said.
How could a Diddy bid be structured?
“I imagine a bid from Diddy for the Knicks being structured in a similar way as Derek Jeter’s acquisition of the Miami Marlins,” Channer told Moguldom. “My sense is that 50 percent of the money would be raised in the form of debt from a non-bank capital source – sovereign wealth or similar.
“The rest would be funded by capital pooled among an investment group that Diddy would pull together. Like Jeter, he would likely recruit at least one significant co-investor with a private equity, hedge fund or wealth management background. It would make a bold statement if Diddy connected with someone like Mr. Aliko Dangote from Nigeria. He
is the wealthiest Black person in the world with a net worth over $10 billion.”
Sonenclar recalled the deal struck when George Steinbrenner bought the New YorkYankees from CBS in 1973 for $12 million. “He reportedly put up less than $1 million from his own pocket,” Sonenclar said. “The remainder came from partners (most of whom he eventually bought out) and outside financing.”