Industry Analysts and MLB Insiders on Orioles' $1.725 Billion Valuation: 'Low'

In baseball, the reaction to the Baltimore Orioles' valuation at $1.725 billion has been one of surprise and, in some cases, disbelief.

Seven industry analysts and rival officials, granted anonymity in exchange for their candor, all used the same word to describe the price:

“Low.”

The Orioles on Wednesday officially announced the sale of the franchise to a group led by David Rubenstein, a Baltimore native and founder of private equity firm The Carlyle Group. According to Puck News, which first reported the sale, the Rubenstein group will initially take over about 40 percent of the club. According to a source briefed on the terms, the group will then have the option to acquire full control following the death of Peter Angelos, pending approval by Major League Baseball.

That approval would likely take months as the league conducts background and financial checks on members of Rubenstein's group and reviews sales through internal committees. People in the sport offered several possible reasons why Peter's son, Orioles managing partner John Angelos, accepted the $1.725 billion valuation even though higher bids might have been available both in the past and in the future.

Those reasons included John's possible frustration over the Orioles' recently recorded lease negotiations at Camden Yards, cash flow issues the family might face and the influence of Georgia Angelos, John's mother and Peter's wife. John Angelos leads the club in the absence of his father, who is 94 and has been unable to work due to illness since 2018.

A spokesman for John Angelos declined comment.

Other Major League teams have sold for less than the Orioles in recent years. The Miami Marlins went for $1.2 billion in 2017, the Kansas City Royals for $1 billion in 2019. The Cleveland Guardians, under the same kind of path-to-control arrangement the Orioles use, were valued at $1 billion in 2022 dollars.

While Miami and Cleveland are larger media markets than Baltimorethe Orioles are seen as a franchise with more potential due to the current quality of the team and the passion of their fan base.

Peter Angelos bought the Orioles in 1993 for $173 million. Forbes valued the Orioles at $1.713 billion last March. However, that valuation did not include the Mid-Atlantic Sports Network (MASN), in which the team is the majority owner in a dual ownership with the Washington Nationals.

MASN is involved in the purchase of the Rubenstein Group, and some in the industry expect the group to sell the network to Ted Leonsis, the owner of NHL, NBA and WNBA franchises in Washington and another regional sports network, Monumental , which broadcasts all three teams. . Like all regional sports networks in this era of cord-cutting, MASN is not as valuable as it once was. But Leonsis would at least want to buy the Orioles' TV rights to enhance his programming on Monumental in the spring, summer and fall.

In late 2022, Leonsis made a bid for the Nationals with similar intentions, providing perhaps the most relevant data point in assessing the Orioles' valuation. Leonsis offered $2.2 billion for the Nationals, according to a source briefed on the discussions. The Lerner family, owners of the Nationals, did not accept the proposal because they apparently believed the team was worth more.

Washington is a bigger market than Baltimore, but the Nationals became a lesser partner in MASN as a condition of moving from Montreal to Washington in 2005. So why wouldn't John Angelos, chairman and CEO of the Orioles, in his father's absence, hold on for a price similar to the one Leonsis proposed for the Nationals?

The deal between the Orioles and the Rubenstein group apparently came together quickly, catching Maryland state officials and another group interested in the club by surprise.

Just over six weeks ago, the Orioles reached an agreement with the state on a new long-term lease for Camden Yards. The deal included $600 million in public funds for ballpark upgrades and potential development rights around the ballpark.

“If John (Angelos) can hear me right now, it is very disappointing and disturbing that you can look your condition in the face and outright lie to us about your intentions.” Maryland State Treasurer Dereck Davis told The (Baltimore) Sun. “We had a right to know, given the amount of investment we were making in this.”

However, people in the game mentioned a combination of factors that might have increased Angelos' urgency to sell and convinced him to go through with the deal sooner rather than later:

The final terms of the Orioles' new lease

Angelos, in his negotiations with the state, sought to develop an area around Camden Yards and make it similar to the Battery Atlanta complex adjacent to the Braves' Truist Park, which opened in 2017.

He did not acquire those rights.

All the Orioles received was an option to end the 30-year lease after 15 years if they didn't reach an agreement with the state on a development plan that might not even be feasible. The necessary land for such a project around Camden Yards does not exist. The ballpark is located in the middle of Baltimore, while Truist was built in a suburb 10 miles outside of Atlanta.

Angelos fought hard for the development rights, apparently believing they were worth hundreds of millions of dollars. When he failed to secure them, he was left, at least in his opinion, without a potentially lucrative source of income and a means to increase the value of the franchise.

Cash flow problems

The bill for the Orioles in their years-long dispute with the Nationals over television rights fees is coming.

In June, Orioles-controlled MASN agreed to pay the Nationals about $100 million in unpaid rights fees for the period between 2012 and '16. In November, a committee appointed by the league ruled MASN owed the Orioles and Nationals approximately $300 million each for the period between 2017 and '21. The rights fees for the years 2022 to '26 have not yet been determined.

MASN held approximately $105 million in escrow in preparation for the possibility of the first payment. It is not known how the network – and by extension Angelos – planned to raise the money for the period 2017 through '21.

What is known is that the Angelos family is trying to become more liquid the sale of various land propertiesincluding One Charles Center, a 22-story office tower in downtown Baltimore.

Family considerations

The influence of Georgia Angelos, Peter's wife and John's mother, played no small role in the family's decision to sell, according to two sources briefed on the talks.

Georgia's exact motivations are unclear, but she and John were sued by her other son, Louis Angelos, in 2022 for control of the team. According to the lawsuit, Georgia determined it was in the family's best interest to sell the team, but John misled her into believing he was working to achieve that goal when he ultimately wanted to thwart it.

According to court documents from the lawsuitGeorgia attorneys wrote that the family was not supposed to own the team forever. Peter felt that the Orioles should be sold upon his death so that Georgia could enjoy the great wealth they had amassed together, but he felt that decision was ultimately Georgia's.”

By identifying a buyer before Peter's death, the family reaches a solution. The two-step sale – 40 percent now, 60 percent later – will allow the family to receive a cash infusion while avoiding the full capital gains tax they would have to pay if they sold the entire club before Peter's death.

In a statement on Wednesday, John Angelos said: “When I assumed the role of Chairman and CEO of the Orioles, we had the goal of returning the franchise to elite status in Major League sports, helping the team continue for years to come. would stay in Baltimore. and revitalizing our partnership group. The relationship with David Rubenstein and his partners confirms that we have not only achieved our goals, but exceeded them.”

The deal could work for Angelos. The question is whether this will cause a downward ripple effect on other teams' valuations in the future.

(Top photo (l-r) of Louis Angelos, Orioles executive VP Mike Elias, John Angelos in 2018: AP Photo/Patrick Semansky)