How Rays’ Potential $1.7-Billion Sale Impacts Likelihood of a Twins Ownership Change

[Rod Carews Birthday]

2 hours ago, LA VIkes Fan said:

Are you sure this is this right? Generally speaking, any debt is factored into the price when buying assets, i.e.., the seller either pays off the debt from the sales proceeds or the buyer assumption of the debt is part of the price, so the price is $1.275 cash plus $425m in assumed debt. The latter option assumes that the debt is assumable which oftentimes it is not. There is often an acceleration clause which requires that the debt be paid upon the sale of the asset.

I don't know the details but I don't think it's a safe assumption that the Pohlads are looking for $1.7B in cash plus the assumption of $425M in debt. If they are, the stated price would be $2.125B and I haven't seen that anywhere. I'm curious if anyone has seen the debt assumption piece explained. You guys are right about one thing, if the Pohlads are looking for $2,125B for the team, this will be a long and bumpy ride.  

You are definitely right that "assuming" debt is factored into the sticker price on most things, and I would be very pleased if you are right, but I'm not optimistic.  When the $425M debt was made known, it was presented in a manner that suggested that the buyer would assume the debt.  Otherwise, the debt is a non-issue, so why would it have been brought up? 

[LA Vikes Fan]

Well, we're both guessing here but I can think of two reasons why the presence of that debt influences the salability of the team even without it driving up the effective price. First, if that debt is from operating the Twins, the presence of that level of debt would tell a buyer a lot about the viability of the operation on a cash return basis. In other words, if the Twins are accumulating debt from operations it hard to see who a new buyer wouldn't have to do the same thing. No one wants to pay $1.7 for an asset and also finance it's operations, all in the hope of selling it for a profit later in a market where there is no real possibility of new contract with higher TV revenue, the sport itself isn't growing like other sports are, and it's hard to see another basis why values would rise. The second is the debt service. Assuming debt in a tough interest rate environment raises interest costs and there really doesn't seem to be a lot of reason to assume rates are going to decrease over the next few years given the increasing federal budget deficit. Assuming the debt makes the team more expensive to operate because of the interest payments. 

What I would really like to know is if the Twins are profitable, beak even, or lose money from operations. I suspect they are at best a break even. It's hard to see how revenue is going to go up. Maybe a new TV deal could help but it's hard to see that being out there. What about attendance? Is there a way to get it regularly above 2 million? If not, it's going to be hard to make money with this team. Minneapolis isn't a fast growing city like Tampa where one could project future attendance growth from simple population growth.  

It may be that the only way to sell the Twins for 1.7B is as a vanity investment to a multi billionaire looking to be on TV and hob nob with other owners. There just aren't a lot of those guys out there and I don't know that any of them live in Minnesota. 

[Jocko87]

I think the other factor not yet mentioned is the relative tax situations of Maryland, Minnesota and Florida.  It affects the price greatly.