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The Highest Priced Sale In U.S. Sports History

January 12, 2022

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Hey Friends,

Billionaire hedge fund manager Steve Cohen purchased the New York Mets for $2.4 billion in 2020, which is the highest price paid for a U.S. sports team in history.

But with the Denver Broncos potentially going up for sale this offseason, it looks like that record might not stand for much longer.

This has become an extremely complicated situation, but here’s an overgeneralized summary — Edgar Kaiser Jr. owned the Denver Broncos from 1981 to 1984 before selling to Pat Bowlen, who owned the team until he died in 2019.

Bowlen had created a three-person trust to either sell the team or identify an heir from one of his seven children following his death. Still, Kaiser’s estate has argued that the right of first refusal to match any offer the Broncos receive should still be active based on the agreement Kaiser & Bowlen signed in 1984.

To summarize:

  1. Edgar Kaiser Jr. owned the Denver Broncos from 1981 to 1984.

  2. Kaiser sold the Broncos to Pat Bowlen in 1984.

  3. Pat Bowlen owned the Broncos from 1984 until his passing in 2019.

  4. Bowlen had a trust to sell the team or decide ownership stake upon his death.

  5. Kaiser’s estate has argued that his right of first refusal should still be active.

But a Denver judge officially put an end to this yesterday, releasing a 41-page report that decided the 1984 sales agreement between Kaiser and Bowlen was "no longer valid or enforceable in any respect.''

Here’s an overview of the case from the team at Sportico:

A multiyear legal dispute centering on the right to match an offer to buy the Denver Broncos was clarified on Tuesday when Judge Shelly Gilman of Denver’s Second District Court nullified a contractual right of first refusal (ROFR). The move could pave the way for the most expensive team sale in U.S. sports history.

A group representing the team’s owners—a trust representing the late Pat Bowlen and Bowlen Sports—have argued that the ROFR, found in a 1984 purchase and sale agreement of the Broncos, is not enforceable.

The plaintiffs insist that the ROFR lost effect when Bowlen and Edgar Kaiser Jr., the person from whom Bowlen bought the team in 1984, passed away. (Bowlen died in 2019 and Kaiser died in 2012.) The plaintiffs maintain the ROFR was an understanding between the two late men, rather than a contractual term that bound the franchise thereafter.

On the opposite of the litigation are the Kaiser Estate and a holding company. The defendants assert that the ROFR has continued in effect. As they explain the ROFR, its responsibilities and obligations were assigned to successors of Bowlen and Kaiser. They have also argued the ROFR was essential to the 1984 transaction since Kaiser allegedly wanted final say on who would own the Broncos in the event Bowlen attempted to sell. The two sides went to trial last fall.

Judge Gillman held that the ROFR is no longer enforceable. This means the Kaiser defendants will not receive a chance to match a sale, nor will they receive notice of a pending transaction (which would separately need approval by the NFL). The judge’s order can be appealed.

I certainly don’t have a law degree, so I won’t even attempt to break down the case.

My interest lies much more in what happens from here. The Denver Broncos are currently valued between $3.5 billion and $4 billion, depending on what revenue multiple or valuation service you want to use. That makes them far and away the highest-priced team to go up for sale in U.S. professional sports history.

There are already rumors that six groups are ready to bid, and that Peyton Manning and John Elway will be involved, albeit in two separate bidding groups.

It’ll be interesting to see how this plays out for a few different reasons. First, the NFL requires that a majority owner controls at least 30% of the franchise, but at a potential price tag of $4 billion, how many minority owners get involved also?

Furthermore, David Tepper paid an NFL record $2.275 billion to acquire the Carolina Panthers in 2018 — the circumstances are different, but how much value does sports betting and the NFL’s new $100 billion in media deals provide?

These questions won’t be answered overnight, but blue-chip sports assets don’t go up for sale that often, so I imagine this isn’t the last we will hear about the Denver Broncos.

I hope everyone has a great day, and we’ll talk tomorrow.

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