(Bloomberg) — With the NFL’s Denver Broncos up for sale, the field is set for a battle between members of the 0.1%.
With fewer than a dozen sales of a National Football League franchise over the past two decades, the opportunity to own the Broncos provides a rare opportunity to enter an elite club of kingmakers. And the barrier for entry into the hall of NFL owners is getting higher. The valuation of professional sports teams has skyrocketed in recent years, with prices well into the billions.
Hedge fund titan David Tepper won the bid for the Carolina Panthers a few years ago, paying an NFL record $2.3 billion in cash and eclipsing the $1.4 billion Terry Pegula paid for the Buffalo Bills in 2014. In 2019, Alibaba co-founder Joe Tsai also paid an unprecedented $3.3 billion for the Brooklyn Nets NBA team after Tilman Fertitta bought the Houston Rockets a few years prior. Online news site Sportico valued the Broncos at $3.8 billion in September.
Rising valuations are a direct result of surging wealth. Soaring markets and stratospheric values for everything from homes to cryptocurrencies due to years of fiscal stimulus and ample liquidity have boosted wealthy Americans’ fortunes to historic levels. The richest 171 Americans ranked on the Bloomberg Billionaires Index collectively added $660 billion to their net worth last year. The result is an ever-growing pool of people with the means and desire to chase a static number of NFL teams.
The ownership of a professional sports team doesn’t just present a pass into a VIP club for the super-rich. With tech magnates, hedge fund titans, business moguls and more entering bidding wars, securing a franchise could be part of a larger business strategy because it could bring lucrative financial incentives.
Owners are allowed to deduct the cost of buying a team over 15 years from their taxable income, a form of deduction known as amortization, according to the Tax Foundation. Whoever buys the Broncos could be in for a tax write-off of as much as $3 billion, Sportico reported.
Former Microsoft chief Steve Ballmer, owner of the NBA’s Los Angeles Clippers, used the deduction to help pay a tax rate of 12% in 2018 — about a third of the rate paid that year by the Los Angeles Lakers’ Lebron James, according to a report last year by ProPublica that cited confidential tax records.
The Broncos began interviewing bankers in November in advance of a potential sale. Robert F. Smith, who is worth $8.9 billion, was seen as a potential bidder, but a person with knowledge of the matter said that the chief executive officer of Vista Equity Partners currently isn’t interested.
For the Panthers, Tepper beat out Ben Navarro, founder of Sherman Financial Group LLC, and Stelco Holdings Inc. Chief Executive Officer Alan Kestenbaum. During that bidding process in 2018, Kestenbaum said he didn’t want a trophy asset and viewed a potential purchase as an investment.
That’s because sports fans — even though they are frequently roiled by buffeted by ownership changes and rising ticket prices — typically remain loyal to their teams, and demand for live sports keeps the value of television rights high.
Former Broncos quarterback Peyton Manning has spoken with multiple suitors for the team, and is considering playing a role as an investor or manager, according to a CBS Sports report.
Several other billionaires have expressed interest in owning sports team. A representative for Amazon.com Inc. founder Jeff Bezos previously held talks with sports investment banking firm Moag & Co. for a 40% stake in the Washington Football Team (now the Washington Commanders), according to Front Office Sports. Former President Donald Trump made a bid for the Buffalo Bills in 2014.
The sale of the Broncos has hung in the balance since June 2019 when the death of longtime owner Pat Bowlen prompted a family dispute over the franchise. Following a legal battle over the rights, the Pat Bowlen Trust finally announced on Tuesday that the team was officially up for sale.
The news coincides with a lawsuit by former head coach of the Miami Dolphins, Brian Flores, accusing the NFL of pervasive racial bias. According to Flores, Dolphins owner Stephen Ross, the billionaire real-estate developer, instructed him to “tank” as many games as he could during the 2019 season, dangling a $100,000 reward for each loss.
–With assistance from Scott Carpenter and Devon Pendleton.
To contact the author of this story:
Paulina Cachero in New York at [email protected]