Hal Stienbrenner and the Steinbrenner family will continue to be the majority owners of Yankees, but a $2.6 billion minority investment by Apollo Sports Capital will see a significant private equity seat at the table. (Photo by Dustin Satloff/Getty Images)
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Major League Baseball has seen a flurry of club sales and investments in them in the months leading up to the next labor deal with the players, in which the owners are seeking a salary cap for the first time since 1995. While all of them are important, the $2.6 billion investment by Apollo Global Management in the New York Yankees is especially significant. Here are 10 reasons why.
It’s The Yankees
Let’s just start with the obvious: the investment is in the most-storied franchise in all of Major League Baseball. The Yankees aren’t just some other club; they are a bellwether for the ceiling franchise values can achieve and show that there is still a healthy interest for investors in the 30 clubs.
Multiple sources report that the deal started coming together over the summer with the New York Post reporting that Apollo’s portion of the deal was closed on August 11. Word surfaced weeks ago that a deal was on the horizon. As the statement by Apollo shows, the deal is all but done with the possibility of closing occurring as early as this week.
The Investment Is More Than Just The Yankees
Apollo is investing in Yankees Global Enterprise, which includes not only the Yankees but also the club-owned regional sports network, YES Network, Legends Hospitality, and AC Milan.
One Of First Tests Of New MLB Private Equity Rules
Major League Baseball, like all other professional sports leagues, has been careful about the amount of money private equity is allowed to invest and control franchises. There are good reasons for this, given that PE’s sole driver is profit.
For a considerable period of time, Major League Baseball had a flat rule that no club could have more than 15% private equity ownership.
Without fanfare, this past summer MLB’s owners changed the amount of private equity clubs could have as part of ownership, aligning it closer to what is in the NBA, where the limit is 20%. but if the controlling owner owns less than 20%, then the amount owned by the controlling owner is the limit (For example, if the controlling owner owns 19% that would be the limit).
This change plays into the Apollo investment, given they will now own 16%. That would make the deal with the Yankees one of – if not the – first cases of increased private equity ownership of an MLB club.
New Record MLB Valuation
According to multiple reports, Apollo’s investment is based on a Yankees valuation in excess of $12 billion, which would be a staggering $3.5 billion over the current $8.5 billion Forbes valuation, and $2.6 billion over the Sportico valuation.
Yankees Value Shoots Up The Global Rankings
Forbes currently ranks the Dallas Cowboys as the most valuable global franchise value at $13 billion. The Apollo investment will launch the Yankees from #10 to either #2 or #3 depending on how far over the $12 billion mark the valuation hits (the Lakers are currently #2 after the $12.5 billion sale from Mark Walter to Josh Kushner and former Disney CEO Bob Iger).
While Investment Is Large, Apollo Has Minimal Control
According to the New York Post, while Apollo will become the largest minority investor, the Steinbrenner family will still control over 60% of the club. In terms of actual control, it falls under “de minimis” portion of its controlling stake of no more than 3%.
The Large Infusion Assists With Everything From Player Payroll To Debt
When the Angels sold for a record $4 billion, it came with no debt. The Yankees, even with the staggering media rights, robust attendance, and sponsorship deals befitting the league’s most legendary club, still carry debt.
The Apollo investment is significant in it gives the Yankees instant flexibility to address player payroll, weather the impending lockout, but also debt tied to funding New Yankee Stadium, which Forbes calculates to be under $100 million, or 1% of the most recent valuation.
The $2.6 Billion Doesn’t Arrive All At Once
According to Mike Ozanian of CNBC, the money flowing into the Yankees will be done in chunks, and part of it is a loan.
Under the terms, $800 million would be paid for 8% of the Yankees Global Enterprise deal. Another $800 million would be paid over four years with those being new shares that would go against the Yankees’ balance sheet. And, Apollo is loaning the Yankees $1 billion.
According to the New York Post, the cash will also refinance holding company bank debt at a significantly lower cost.
Apollo Grows Their Sports Portfolio
Apollo, under its newly formed Apollo Sports Capital, has invested in other sports properties, but nothing on the scale of the New York Yankees. In doing so, they grow their portfolio, which currently includes a majority stake in Spanish football club, Atletico Madrid, as well as a stake in Pickleball Inc., a major parent company that unifies professional tours, retail, media, and infrastructure across the global pickleball industry.
With The Deal, Al Tylis Joins A Growing Yankees Global Enterprise Board
With the investment, Al Tylis, who leads Apollo Sports Capital, will join the 13-member Yankees Global Enterprise board, expanding it to 14 seats.
“The New York Yankees are one of the most iconic franchises in sports, defined by a legacy of greatness. It is a privilege for Apollo Sports Capital to partner with the Yankees, and we are grateful to the Steinbrenner family for their trust,” said Tylis in a statement through Apollo Global Enterprises. “We look forward to supporting the organization’s continued pursuit of excellence and the championship standard that has long been the hallmark of the New York Yankees.”
Apollo had approximately $1.05 trillion of assets under management as of June 30 of this year.
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