Industry analysts, MLB insiders on Orioles' $1.725 billion valuation: 'Low'

As far as baseball is concerned, the reaction to the Baltimore Orioles' $1.725 billion valuation has been one of surprise and, in some cases, disbelief.

Seven industry analysts and competing officials, who were granted anonymity in exchange for their candor, all used the same word to describe the price:

“a little.”

The Orioles officially announced the sale of the franchise on Wednesday to a group led by David Rubinstein, a Baltimore native who founded the private equity firm The Carlyle Group. According to Puck News, which first reported the sale, the Rubinstein Group will initially buy about 40 percent of the club. According to a source familiar with the terms, the group will have the option of taking full control after Peter Angelos' death, pending approval from Major League Baseball.

That approval will likely take months as the association conducts background and financial checks on Rubinstein Group members and reviews the sale process through internal committees. People in the sport have offered a variety of possible reasons why Peter's son, Orioles managing partner John Angelos, would accept the $1.725 billion valuation, though higher offers may have been available in the past and future.

These reasons included John's potential frustration over the Orioles' recently-involved lease negotiations at Camden Yards, the cash flow problems the family might face and the influence of Georgia Angelos, John's mother and Peter's wife. John Angelos runs the club in the absence of his 94-year-old father, who has been incapacitated due to illness since 2018.

A spokesman for John Angelos declined to comment.

Other major league teams in recent years have sold for less than the Orioles. The Miami Marlins went for $1.2 billion in 2017, and the Kansas City Royals for $1 billion in 2019. The Cleveland Guardians, under the same type of control-path arrangement used by the Orioles, are valued at $1 billion in 2022.

While Miami and Cleveland They are larger media markets than Baltimorethe Orioles are viewed as a franchise with greater potential due to the current quality of the team and the passion of their fan base.

Georgia and Peter Angelos at an event in 1996. (Andre Chung/Baltimore Sun/Tribune News Service via Getty Images)

Peter Angelos bought the Orioles in 1993 for $173 million. Forbes estimated the value of the Orioles family last March at $1.713 billion. However, this evaluation did not include Mid-Atlantic Sports Network (MASN), where the team is the majority shareholder in dual ownership with the Washington Nationals.

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MASN was included in the Rubenstein Group's purchase, and some in the industry expect the group to sell the network to Ted Leonsis, the owner of the NHL, NBA and WNBA franchises in Washington and a different regional sports network, Monumental, which broadcasts all three teams. Like all regional sports networks in this age of great disruption, MASN is no longer as valuable as it once was. But Leonsis may at least want to buy the Orioles' television rights to boost his programming on Monumental in the spring, summer and fall.

In late 2022, Leonsis pitched to the Nationals with similar intentions, providing perhaps the most relevant data point when assessing the Orioles' valuation. Leonsis offered $2.2 billion to Citizens, according to a source familiar with the discussions. The Lerner family, owner of the Nationals, has not moved on the proposal, apparently believing the team is worth more.

Washington is a bigger market than Baltimore, but the Nationals became a minority partner in MASN as a condition of moving from Montreal to Washington in 2005. So why wouldn't John Angelos, chairman and CEO of the Orioles in his father's absence, hold out for a price similar to the Proposed by Leonsis to the Nationals?

The deal between the Orioles and the Rubinstein Group appears to have been reached quickly, surprising Maryland officials and another group interested in the club.

A little more than six weeks ago, the Orioles reached an agreement with the state on a new long-term lease to remain at Camden Yards. The deal included $600 million in public funds for stadium upgrades and potential development rights around the stadium.

“If John (Angelos) can hear me now, it is extremely disappointing and troubling that you can look your country in the eye and lie to us outright about your intentions.” Derek Davis, Maryland state treasurer, told the (Baltimore) Sun. “We had a right to know, given the amount of investment we were committing to this.”

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However, people in the game pointed to a combination of factors that may have increased Angelos' urgency to sell and convinced him to go ahead with the deal sooner rather than later:

Final terms of the Orioles' new lease

In his negotiations with the state, Angelos sought to develop an area around Camden Yards and make it similar to The Battery Atlanta complex adjacent to the Braves' Truist Park, which opened in 2017.

He did not obtain those rights.

All the Orioles got was an option to terminate the 30-year lease after 15 years if they didn't reach an agreement with the state on a development plan that probably wasn't workable. The land needed for such a project around Camden Yards does not exist. The stadium is located in downtown Baltimore, while Truist Stadium was built in a suburb 10 miles outside of Atlanta.

Angelos fought hard for the development rights, believing them to be worth hundreds of millions of dollars. When he failed to secure it, he was left without, at least from his point of view, a profitable revenue source and a way to enhance the value of the franchise.

Cash flow issues

The Orioles' bill in their years-long dispute with the Nationals over television rights fees has become due.

In June, the Orioles-controlled MASN agreed to pay the Nationals about $100 million in unpaid rights fees for the period from 2012 to 2016. In November, a league-appointed panel ruled MASN owes the Orioles and Nationals about $300 million Each for the period between 2017 and 21. Rights fees for 2022-26 have not been set.

MASN has held approximately $105 million in escrow in preparation for the possibility of the first payment. It is not known how the network – and by extension Angelus – plans to raise money for 2017-21.

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It is known that the Angelos family seeks to become more liquid through it Selling a variety of land assetsincluding One Charles Center, a 22-story office tower in downtown Baltimore.

Family considerations

The influence of Georgia Angelos, Peter's wife and John's mother, was no small factor in the family's decision to sell, according to two sources familiar with the discussions.

Georgia's exact motives are unclear, but she and John were sued by her other son, Luis Angelos, to take control of the team in 2022. According to the suit, Georgia decided it was in the family's best interest to sell the team, but John was misled. He led her to believe that he was working towards this goal when in the end he wanted to thwart him.

according to Court documents from the lawsuitGeorgia's lawyers wrote that her husband did not intend for the family to own the team forever, saying: “Although Peter felt that the Orioles should be sold upon his death so that Georgia could enjoy the significant fortune they had accumulated together, he felt that the decision was ultimately his.” Georgia jurisdiction.

By identifying the buyer before Peter's death, the family reaches a solution. A two-stage sale – 40% now, 60% later – enables the family to receive a cash payment while avoiding the full capital gains tax they would incur if they sold the entire club before Peter died.

“When I took over as president and CEO of the Orioles, our goal was to restore the franchise to elite status in major league sports and keep the team in Baltimore for years to come,” John Angelos said in a statement Wednesday. and revitalize our partnership group. The relationship with David Rubenstein and Associates proves that we have not only met our goals, but exceeded them.

The deal might work out for Angelos. The question is whether this will create a downward ripple effect on other teams' valuations in the future.

(Top photo (from left) of Louis Angelos, Orioles executive vice president Mike Elias, and John Angelos in 2018: AP Photo/Patrick Semansky)

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