Wednesday, July 23, 2008

The Raiders are a corporate entity operating as a hedge fund

Editorial edit 7-27-08

Just want to make it clear, the purpose of this article is not to highlight anything shady. Whatever is mentioned here is normal business practice. I'm just expanding on it based on news in the public domain and making that information available to interested readers.

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Al Davis Sells Minority Stake In Raiders To Three Businessmen
By David White, San Francisco Chronicle

Al Davis is still in complete control of all things Raiders. He just has more partners and additional cash flow after Wednesday's deal.

At the league owners meeting in Philadelphia, the NFL gave the Raiders approval to sell a 20 percent minority interest to a group of investors. However, Davis and his family retained their controlling interest in the team. They did not relinquish their power, and they don't ever plan to.

The small group of East Coast businessmen is led by David Abrams, director of the Abrams Capital investment firm; Paul Leff, founder of the Perry Corporation money management firm, and Dan Goldring, managing director at Perry Corp.

"They are thrilled to join the history and tradition of the Raiders," team chief executive Amy Trask said. "We are impressed with their passion for the Raiders and their love of the game of football, and we are excited to welcome them as limited partners in the Raiders."

Team officials did not release any further information about the limited partners or terms of the sale.
Davis, who was believed to own about 67 percent of the team, is the majority shareholder and managing general partner. He's tried to sell a minority share for at least a year after picking up a 31 percent share in a financial settlement with the heirs of former Raiders co-founder Ed McGah.

Davis reportedly paid out about $90 million in the court-mediated settlement. Forbes magazine estimated the Raiders' value at $812 million, which ranks 28th in the 32-team league, in its annual league evaluations last month.

The other limited partners are Ginny Boscacci, Rita Boscacci, Jack Hartman, Bob Seaman, Doray Vail and Gertrude Winkenbach, according to the team media guide.

The deal has been in the works for several months and awaited NFL approval at this week's owners meeting. The vote was unanimous, according to a league official.

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Daniel Kaplan, SportsBusiness Journal
Oakland Raiders managing general partner Al Davis received $150 million for the 20 percent stake in the team he sold to three investors last month, league and financial sources said, placing a value on the franchise of at least $750 million.

Because majority buyers normally pay a takeover premium, and the team's stadium lease expires after the 2010 season -- meaning the club can move -- the value of the franchise is likely even higher. Any debt on the team would also add to its overall value.

While the club has a rich history and reputation, the price surprised some in finance because the team in recent years has played to weak crowds and struggled on the field. The team's president, Amy Trask, also said the limited partnership stake includes no option to buy the team when Davis, 78, dies.

"If there was no right to match or right of first offer [to a takeover], I think that valuation for a nonvoting [limited partnership] interest was very high," said one of the financial sources, who requested anonymity because he had been briefed on the subject by an NFL owner. "If those rights were available to the investors, it strikes me as still being a bit high, but understandable given that it may be very difficult for Davis' heirs to hang on to the business upon his passing."
The Raiders declined to comment on terms of the deal.

Recent Raiders history has the club not winning more than five games in a season since 2002 and failing to regularly fill 63,000-seat McAfee Coliseum despite the venue's being one of the league's smaller stadiums.

As a bottom-tier team in terms of revenue, a Raiders' valuation of about $750 million would be regarded as one of the lower prices for an NFL franchise. Earlier this year, the Jacksonville Jaguars, another lower-tier revenue team, received offers in that range. Upper-tier teams such as the Dallas Cowboys, New England Patriots and Washington Redskins are thought to be worth well over $1 billion.

The three investors buying into the team are David Abrams, Dan Goldring and Paul Leff. Abrams is managing member of Abrams Capital, a Boston investment firm. Leff is co-founder of New York hedge fund Perry Partners, where Goldring is a managing director. None returned calls for this story.

The price, at least for these three, indicates there is little concern about a coming labor war in the NFL, said Marc Ganis, a sports consultant who advised the Raiders on their 1995 move from Los Angeles to Oakland.

"[The price] indicates an expectation that the league will get player costs in line," he said. NFL owners have been unhappy with the collective-bargaining agreement extension signed last year. The owners have an option to opt out of the deal in November 2008, a move that would make 2010 the final season of the contract. That season would also carry no salary cap.

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So, there's a lot to chew on here. Let's look at the essentials as a starting point. "Three businessmen," that would be Mr. Paul Leff, Mr. Dan Goldring and Mr David Abrams.

All I did was a little bit of googling and came up with these pics in the public domain. I brashly re-use them here to illustrate the points I am making. My apologies for including Mr. Goldring's lovely bride, it was the only photo of Dan available. You guys are now part of the Oakland Raider organization and the Raider Nation as we are known.

So for purpose of our discussion we're talking about three regular Joe Raider fan investors as team chief executive Amy Trask explains"They are thrilled to join the history and tradition of the Raiders"

Amy Trask continues, "We are impressed with their passion for the Raiders and their love of the game of football, and we are excited to welcome them as limited partners in the Raiders."

With all due respect to the PR folks at Raiders HQ that's not what's going on here. I'm sure they are excited but the part about love and passion, nah. These guys are not passionate Raider fans who had the financial means and simply wanted in. I'm willing to bet the farm that they don't even follow football and never have (ok, maybe Dan does). Yea, I know football is played in the Ivy League. I'm a big Columbia fan but nah, c'mon. The truth is these guys are hedge fund wiz bangers, expert financial engineers who sling around large chunks of millions as a daily habit. In simple terms, a hedge fund is sort of your big money backup system. It keeps cash flow moving in areas that are doing well to offset any losses you are taking elsewhere. What it comes down to is a large monetary infusion of 150 million clams into the Al Davis free agent slush fund as payment for the "three businessmen" to have a stake in the Raider cash flow empire.

This is where your Tommy Kelly, Terdell Sands, DeAngelo Hall, Gibril Wilson, Kalimba Edwards discussion comes into play and also Nnamdi of course but that is a different story. Are we saying there's no piece of that 150 million pie for sackmaster Derrick Burgess? That's the real shame of this whole thing.

A few years ago there were some rumors about various investment groups (Brent Jones, Eddie Debartolo Jr.) at some point in discussions with Al but nothing came of it until these Bahstin/Wall Street guys show up. So realistically why would these upper stratosphere financial guys be interested in the Oakland Raiders?

Make no mistake, these investors are pros. They aren't about to put 150 million on a losing horse. The NFL is a safe haven for cash flow because it is consistent. The fans budget their lifestyles for their teams. Fans will crimp and save, lay down the credit card, get a second job, pawn off that old guitar to support the silver and black. The rich men know this. They ride that pony to recoup their investment and turn a profit. The fact that the team has not won more than 5 games in a season since 2002 does not seem to have been a factor in the goings on. I'll bet the farm (again), the team's recent won-loss ratio never even came up in discussions! They don't care as long as there is positive cash flow in the Raider treasury and there is, without a shadow of doubt.

What this tells us is Raiders HQ operates like a corporation. Their business strategy is to have multiple complex revenue flows, all at the expense of the Raider Nation consumer. As a future essay will illustrate, this is all part of a grand matrix I refer to as The Raiders Luxury Tax.

1 comment:

Anonymous said...

you are real cool for making this website. Although you may not understand what is really happenig with the Raiders know that they are being hostally taken over by a corporation with the help of the NFL and Boston hedge fund firms. The raiders are losing so the fans will stop supporting them and they can be relocated. Al Davis isn't at fault he cannot fight this criminal activity by himself. The NFL is using ESPN, FOX and CBS to keep the negative press on the Raiders to further turn the fans agaisnt him. RaiderNation needs to support their team and complain to the front office.