The Pittsburgh Penguins Sell For $900 Million

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Hey Friends,

After just a few weeks of circulating rumors and uncertainty, Fenway Sports Group (FSG) has officially announced its acquisition of the NHL’s Pittsburgh Penguins.

FSG is reportedly paying about $900 million for the team, and current owners, Mario Lemieux and Ron Burkle, will remain part of the ownership group.

That $900 million price tag is a slight premium to Sportico’s $850 million estimated valuation and places the Penguins just outside the NHL’s top 10 most-expensive teams.

So why is Fenway Sports Group acquiring a National Hockey League (NHL) team?

Well, it’s complicated. The sports conglomerate sold 10% of their business to RedBird Capital for $750 million earlier this year, making it clear that they intended to use the money to aggressively add premium assets to their existing sports portfolio consisting of the Boston Red Sox, Liverpool F.C., Fenway Park, Anfield, and more.

And the Pittsburgh Penguins seem like a good fit for several reasons.

First, the fanbase is solid. The star-studded trio of Sidney Crosby, Evgeni Malkin, and Kris Letang have established the Penguins as one of the NHL’s most successful franchises over the last two decades.

The team currently has a 14-year playoff streak, which is more than twice as long as any other NHL team, and the franchise recently just ended a 633 game sellout streak that lasted more than 14 years.

Don’t get me wrong; a rebuild is coming when Crosby, Malkin, and Letang eventually retire. Still, a strong and passionate fanbase that keeps showing up night-in-and-night out is instrumental during that transitional period.

Secondly, now is probably a pretty good time to acquire a team.

The COVID-19 pandemic wreaked havoc amongst NHL franchises, driving the Penguins’ annual revenue down from nearly $200 million in 2017 to $160 million last year. Even worse, operating income came in at just $14 million, which is the lowest it’s been in nearly a decade.

As they say, buy low and sell high.

Pittsburgh Penguins Annual Revenue

• 2017: $196 million

• 2018: $185 million

• 2019: $184 million

• 2020: $159 million

Pittsburgh Penguins Operating Income

• 2017: $41 million

• 2018: $43 million

• 2019: $35 million

• 2020: $14 million

Sure, Fenway Sports Group could have probably gotten a better price had they attempted to buy the Penguins prior to the NHL announcing new media deals that will pay the league over $600 million annually — more than 2x the old deal.

But that doesn’t mean that they still won’t see tremendous value from this.

The NHL is a major US professional sports league. These are rare, premium assets that hardly ever go up for sale. They have a strong record of price appreciation — the average NHL franchise valuation is up nearly 200% over the last decade — and they offer appropriate diversification from other asset classes like stocks, bonds, currencies, and commodities.

Sports betting & streaming are two prominent areas of revenue growth, but my guess is that Fenway Sports Group will also aggressively attempt to develop the area around the arena, turning gamedays into extended events and more.

For example, Forbes says the average fan is worth about $56 to the Pittsburgh Penguins — they take local revenue and divide that by the metro population — which might seem like a small amount, but it’s actually not. The top two highest-valued franchises, the Toronto Maple Leafs & NY Rangers, are $34 and $32, respectively.

That means Pittsburgh fans love their team and are willing to pull out their wallet and prove it — Fenway Sports Group has to see that as an incredible asset moving forward.

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

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