Fox RSN sale grows more confusing as Angels owner eyes several networks
The sale of the nearly two dozen of the Fox regional sports networks hampered by lowball bids, confusion over the ownership of digital rights, and overly optimistic expectations by bankers on the final sales price may now be further delayed by the emergence of a powerful baseball owner who has told people he may make a pitch to buy just a handful of the networks, FOX Business has learned.
Billionaire businessman Arturo "Arte" Moreno, the owner of the Los Angeles Angels, has indicated that he would like to purchase as many as four of the RSNs, according to people with knowledge of the matter. Moreno's intentions – which were discussed at Major League Baseball's owners meeting on Friday and have yet to be reported – add a new twist to the auction of the networks.
Disney acquired the RSNs as part of its $71 billion purchase of 21st Century Fox's entertainment assets, but it must sell the properties to meet regulatory requirements since it also owns the giant sports network ESPN. The RSNs broadcast various sports programming through regional cable carriers around the country.
Disney's bankers at Allen & Co. and JPMorgan began the auction in late November, seeking as much as $20 billion for the properties. They hoped to have had the auction completed by mid-January amid speculation that interested buyers included cash-rich tech firms like online retailer Amazon.
But Amazon's interest in all the RSNs never materialized. Other bidders began to run their own financial analysis showing that cord cutting among consumers of sports programming will hurt the future value of the properties. Meanwhile, bankers confused prospective buyers by suggesting the new owners would also own the crucial digital rights of baseball games, when those rights belong to the league and the teams.
As a result, the final price tag of the RSNs is likely to fall below the $20 billion initially sought, a matter also discussed during the owners meeting on Friday.
Major League Baseball Commissioner Rob Manfred has taken an acute interest in the RSN sale out of fear that amid the declining buyer interest, smaller market baseball teams would be put at a marketing and distribution disadvantage if the buyer was too highly leveraged to invest in the properties. That's why MLB has placed a bid for the RSNs valued at around $10 billion.
An MLB spokesman had no comment.
Moreno's potential interest in as many as four of the RSNs – including the one that airs the Angels' games – is based on a similar premise that his team could suffer from the network being placed in what one person with knowledge of the process termed "weak hands."
Moreno purchased the Angels in 2003 and became the first Mexican-American to own one of the nation's top sports franchises. The other networks Moreno is interested in aside from Southern California's Fox Sports West and Prime Ticket, which airs the Angels games, include: Fox Sports Arizona; Fox Sports San Diego, and possibly another, according to people with direct knowledge of the matter.
Moreno is said to be willing to pay around $2 billion for the four RSNs, which reflects a price along the lines of what MLB and other bidders have been willing to pay, these people say.
A spokesman for the Angels had no comment but would not deny Moreno's possible interest in the networks. Bankers at Allen & Co. and JPMorgan didn't return calls for comment. Disney didn't return calls for comment.
Bankers are said not to be inclined on selling the RSNs piecemeal but they may have no choice if bidding remains tepid or current bidders drop out. But by peeling off several networks from the auction, the complete sale of the RSNs could be further delayed, possibly squeezing even more the price Disney can receive for the properties since the networks air games of both large market and less popular, smaller-market sports franchises.
CLICK HERE TO GET THE FOX BUSINESS APP
Already one of the 22 RSNs – the Yankees Entertainment and Sports Network, also known as YES – has been peeled off from the larger auction. The Yankees baseball team holds a 20 percent stake in YES, while the remainder that was held by Fox is now technically in Disney's hands. The Yankees exercised its right to buy back the part of YES it didn't own and has sought a new ownership structure that will likely include selling a minority stake to Amazon.
YES is expected to be valued higher than the other RSNs because the Yankees are baseball's most valuable franchise. At least for now, Amazon has not bid on the other RSNs and CEO Jeff Bezos has focused his intentions on completing the deal for YES. But Bezos might ultimately reverse course if the price of the other RSNs remain depressed, people with knowledge of the matter say.
As FOX Business was first to report, the RSNs have attracted at least three major bidders: John Malone's Liberty Media, Sinclair Broadcasting and Major League Baseball. All three bid around $10 billion for the 21 RSNs.
Adding to the confusion of the bidding is the number of baseball owners involved in the process on different sides of the auction. If Moreno pushes forward, he would be at least the third baseball owner to compete for the RSNs with MLB. Malone, the famed billionaire “cable cowboy” for his long history in pay-TV mergers, also owns the Atlanta Braves. Joining his group is the owner of the Minnesota Twins, Jim Pohlad.
A spokeswoman for Malone and a spokesman for Sinclair had no comment.
