Philadelphia Phillies raise capital at $3 billion valuation


Philadelphia Phillies managing partner and principal owner John Middleton signs autographs before the 2024 London Series game between the New York Mets and the Philadelphia Phillies at London Stadium in London on June 9, 2024.

Daniel Shirey | Major League Baseball | fake images

The Philadelphia Phillies recently raised nearly $500 million in capital from three new investors in a transaction that values ​​the Major League Baseball team and its 25% stake in regional sports network NBC Sports Philadelphia at about $3,000. million dollars, according to two people familiar with the deal. .

As part of the transaction, two existing owners, managing partner John Middleton and Stanley Middleman, also invested more money in the Phillies, bringing the total capital injection to about $600 million, according to the people.

On November 1, Middleton announced that new investors, including Mitchell Morgan and Guntram Weissenberger Jr., would be joining the Phillies. The size of the investment and the third investor were not disclosed.

Since limited partner stakes typically cost about 20% less than controlling stakes because the LPs have no say in how the team is managed, the $3 billion valuation is roughly equivalent to a control valuation of 3.7 billion dollars.

That's an impressive figure considering the Baltimore Orioles sold for $1.73 billion earlier this year and the most ever paid for a baseball team was the $2.42 billion Steve Cohen paid for the New York Mets in 2020.

A little over a year ago, Middleman bought a 16.25% stake in the Phillies for a gross valuation of $2.8 billion.

Based on historical earnings estimates, a $3.7 billion controlling valuation for the Phillies would be eight times 2023 earnings, compared to multiples of 5.3 for the Orioles and 6.7 for the Mets.

The Philadelphia Phillies celebrate after defeating the New York Mets 12-2 in a game at Citi Field in New York City on September 20, 2024.

Dustin Satloff | fake images

The Phillies have one of the best local television offerings in baseball. In 2014, the team signed a deal with NBC Sports Philadelphia that guaranteed the team an average of $100 million a year in rights for 25 years, plus a 25% stake in the regional sports network.

However, cord cutting has resulted in a tougher economy for regional sports networks, the most egregious example being Diamond Sports Group, which filed for Chapter 11 bankruptcy protection in March 2023. As revenues fall of pay television, some baseball teams could see a reduction in their television revenues.

The Phillies' exposure to that risk is lower, as Comcast owns 75% of the regional sports network.

It's unknown what the Phillies will use the proceeds from the capital raise for, but there has been some speculation that the team could go after free agent Juan Soto.

Landing Soto, who could make between $50 million and $70 million a year, would likely net the team a huge luxury tax bill. Last season, the Phillies, led by superstar Bryce Harper, had a payroll of $262 million, the fourth-highest in baseball, according to Cot's Baseball Contracts. The team is required to pay a luxury tax, formerly known as the competitive balance tax, of $10 million, according to Spotrac.

The Phillies have a payroll of $240 million heading into the 2025 season, according to Cot's. MLB's luxury tax limit is set at $241 million.

Before this capital increase, the Middleton family owned 48.75% of the Phillies, the Buck family owned 32.5% and the Middleman family owned 16.25%, according to a person familiar with the team's ownership. Pat Gillick owned 1.5% and David Montgomery owned 1%, the person said.

It is unclear what the precise ownership interests are after the capital increase.

An MLB spokesperson did not respond to CNBC's request for comment. A Phillies spokesman declined to comment, as did a spokesman for Galatioto Sports Partners, the advisory firm that represented the Phillies in the capital raise.

Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.

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