The Cowboys & Yankees Billion-Dollar Business

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Friends,

The Wall Street Journal reports that private equity firm Sixth Street Partners is nearing a deal to buy a majority stake in Legends Hospitality LLC, the sports-and-entertainment events company founded by Dallas Cowboys owner Jerry Jones and late New York Yankees owner George Steinbrenner.

Yes, you read that right — Jerry Jones and George Steinbrenner founded a company together.

Here are the details (Source):

• The deal values Legends at $1.35 billion.

• Sixth Street Partners will own 51% of Legends.

• The Cowboys & Yankees will own 49% of Legends.

Furthermore, New Mountain Capital—which bought roughly a third of Legends in 2017 at a $700 million valuation—is exiting as part of the Sixth Street transaction.

That’s great, but the real question becomes:

What exactly is Legends Hospitality?

Let’s run through it.

First, some history.

While some of the explosive valuation growth that the Dallas Cowboys and New York Yankees have seen is inherently intertwined with geographic location and the overall financial upside of their respective professional leagues, one thing is clear:

From a purely financial perspective, Jerry Jones and George Steinbrenner are two of the best professional sports team owners in history.

Jerry Jones purchased the Dallas Cowboys for $140 million in 1989 — roughly $290 million after adjusting for inflation — but the team is worth almost $6 billion today.

How about George Steinbrenner?

He’s done just as well.

Steinbrenner bought the New York Yankees from CBS for $8.8 million in 1973, but the team is now worth $5 billion.

Simply put, Jones and Steinbrenner maximized the return on their investment like no other professional sports franchise owner in history has done.

Next up, capitalizing on their experience.

Like every great entrepreneur, when Jerry Jones and George Steinbrenner saw a market ripe for disruption, they had to get involved — no matter how successful they already were.

What am I talking about?

Legends Hospitality LLC, a food, beverage, merchandise, retail, and stadium operations company serving entertainment venues.

Founded in 2008, the objective of Legends Hospitality was simple:

To create a repeatable process that allowed other professional organizations and venues to profit similarly to how the Dallas Cowboys and New York Yankees have.

In the decade since they’ve done exactly that.

Legends originally started as a concession and hospitality service company operating in Yankee Stadium and AT&T Stadium but have since expanded its offering to include naming rights sales, sponsorship valuations, ticketing, merchandising, and e-commerce expansion.

Today, Legends Hospitality assists teams and venues all over the world.

Here are a few examples (Source):

• Liverpool FC

• Wimbledon

• SoFi Stadium

• Tampa Bay Buccaneers

• Manchester City

• Las Vegas Raiders

• University of Notre Dame

• Los Angeles Rams

• Tennessee Titans

• Real Madrid

• Ohio State University

Details are still limited on what Sixth Street Partners intends to do with Legends Hospitality long-term, but Sportico suggests that the firm is looking to “prioritize assets that can grow double-digits annually and tend not to be subject to the moves of the broader stock market.”

Then again, aren’t we all?

In the end, I’m more impressed with Jerry Jones and George Steinbrenner.

Despite each of them already running multi-billion-dollar businesses, they saw an opportunity and took full advantage of it.

By leveraging their previous success, distributing industry knowledge, and setting up the infrastructure to capture equity upside, they built another billion-dollar business.

Now that’s legendary.

Have a great day, and we’ll talk tomorrow.

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Extra Credit

Going along with the theme of today’s email, here’s a thread I did in September on how Jerry Jones acquired the Dallas Cowboys.

Check it out. It’s a great story.

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