January 07, 1997|By Peter Schmuck | Peter Schmuck,SUN STAFF
The Los Angeles Dodgers, the tradition-rich baseball franchise that became the economic envy of professional sports after it tapped the growing West Coast market in the late 1950s, has been put up for sale.
Club president Peter O'Malley announced yesterday that his family is seeking a buyer for the club's extensive assets, apparently in a pre-emptive move to protect the family fortune against future estate taxes and -- perhaps -- to get out of baseball before increased revenue-sharing and dwindling profits begin to erode the value of the club.
"The time is approaching when a family cannot support a major-league baseball team," O'Malley said at a Dodger Stadium news conference yesterday afternoon. "It's a time of corporate ownership. All economic factors figure into this. Family ownership is probably a dying breed."
The O'Malleys are one of the few holdovers from the era of family ownership. They have owned the Dodgers since Walter O'Malley gained control of the club in 1950, and have built it into one of the most successful professional sports franchises in history. But the changing economics of baseball have conspired to make it difficult for even the strongest clubs to turn a profit.
O'Malley was criticized when he claimed early in baseball's long-running labor dispute that the Dodgers were losing money. No one could imagine that a team that owned its stadium and kept almost all of the revenue from tickets, parking and concessions could fail to turn a profit, but in an era of spiraling salaries, other big-market teams are making the same claim.
This year, Orioles owner Peter Angelos also made that claim, even though his club has one of the richest revenue streams in the industry.
"Why does everyone say we 'claim' that we lost money?" Angelos said yesterday. "What Peter O'Malley was saying and what Peter Angelos is saying and what other owners are saying is absolutely true."
The Dodgers' assets -- which include the team, Dodger Stadium, the Dodgertown spring training facility in Florida and a baseball complex in the Dominican Republic -- could be worth as much as $400 million, making the potential return on the value of the investment relatively small.
The actual value of the franchise will be determined by the potential buyers, but the team alone figures to be worth as much as the Orioles' franchise, which Angelos purchased at auction for $173 million in August 1993.
"If [the team] is worth $200 million, he should be earning $15 million to $20 million on that asset," Angelos said. "I guarantee you he isn't even close. Looking at today's salary levels, it's very possible that the return on the value of that asset is relatively minimal."
The decision, according to a high-ranking major-league official, is a sound one because O'Malley needs to insulate the family and the team against the potentially disastrous impact of federal estate taxes in the event that O'Malley or his sister (co-owner Terry Seidler) should die.
Federal estate taxes rise to 55 percent on the portion of an estate valued at more than $5 million, enough to force the sale or refinancing of a wholly owned franchise.
"It's probably smart to plan for the future. That's probably the main reason," O'Malley said. "I'm not a tax expert, [but] it's a pretty good idea not to have all your eggs in one basket."
There was room for speculation that the decision also was motivated by O'Malley's rumored disapproval of the ownership faction that has taken control of Major League Baseball and presided over the four-year labor dispute, but ownership negotiator Randy Levine said yesterday that the Dodgers' president was supportive of his efforts to strike a deal with the Major League Baseball Players Association.
"He was always one of my biggest supporters," Levine said. "He always has been a man of great wisdom, somebody who looked out for the best interests of baseball."
Still, the new labor contract does not figure to have a dramatic effect on rising salaries, and the revenue-sharing plan included in it will make it even harder for big-market teams to remain profitable.
O'Malley indicated that it could take six months or more to complete a deal for the club. He did not name any potential buyers, but the potentially staggering price tag probably limits the likely candidates to a small group of large corporations. There were rumors last year that the club would be sold to Sony Corp., but there was no indication yesterday whether the Japanese entertainment giant is a potential buyer.
Major League Baseball's approval process also could add six to 12 months to the process.
News that the club was for sale appeared to catch everyone outside of O'Malley's inner circle very much by surprise. There was speculation early yesterday that the news conference would be to announce that O'Malley was moving forward on a plan to acquire a new NFL franchise for Los Angeles, and it remains possible that he will use some of the proceeds from the sale to do that.
"The O'Malley family has been an important and innovative player in Major League Baseball for nearly half a century," said acting commissioner Bud Selig in a statement. "The Dodgers franchise under their leadership has enjoyed phenomenal success. The O'Malleys leave to baseball a rich and powerful legacy."
Pub Date: 1/07/97
