WFT: Dan Snyder Pays $875M For 100% Control

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Friends,

Washington Football Team owner Dan Snyder is set to significantly increase his majority ownership stake, buying out minority owners Fred Smith (FedEx), Robert Rothman (Black Diamond), and Dwight Schar (NVR Inc.).

Snyder is set to pay $875 million for their 40.5% ownership stake, bringing his total ownership stake to more than 80% (Source).

The longtime Washington owner has requested and received permission from the NFL’s finance committee for a $450 million debt waiver, which still needs to be approved by 24 of the 32 owners next week, but leads the way for the transaction to be completed sooner rather than later (Source).

Tyler Dunne of GoLongTD.com first reported the news.

Here’s how Washington’s ownership structure will change.

Current Ownership Stakes

• Dan Snyder: 40.59%

• Smith/Rotherman/Schar: 40.5%

• Michele Snyder (sister): 12.5%

• Arlette Snyder (mother): 6.5%

New Ownership Stakes

• Dan Snyder: 81%

• Michele Snyder (sister): 12.5%

• Arlette Snyder (mother): 6.5%

Bottom line — The deal will give Dan Snyder and his family 100% ownership control of the NFL franchise.

Following the death of former team owner Jack Kent Cooke, Dan Snyder purchased the NFL franchise formerly known as the Washington Redskins, along with their stadium and surrounding real estate, for $800 million in 1999.

While that would be considered cheap today, it was the most expensive transaction in US professional sports history at the time.

The two decades since?

It’s been a mixed bag, to say the least.

Snyder originally borrowed $340M and assumed $155M of debt on the stadium when he acquired control of the franchise in 1999, but with an estimated $50M in annual loan servicing costs, he quickly needed additional capital.

Looking to pay down the team’s debt in 2003, Snyder sold 35% of the franchise to Dwight Schar, Robert Rothman, and Frederick Smith for more than $400M.

The additional capital provided financial flexibility, allowing the franchise to thrive (Source).

• 1999 revenue: $100 million

• 2005 revenue: $303 million

• 2010 revenue: $352 million

• 2015 revenue: $447 million

• 2019 revenue: $504 million

Furthermore, while they have yet to establish themselves as a premier NFL franchise from a competitiveness standpoint, their financial valuation has followed league-wide media deals higher.

Ultimately, it’s tough to tell what impact Dan Snyder has had on The Washington Football Team from a financial perspective. Every single NFL team has increased in value by an inordinate amount over the last two decades. That’s become standard procedure for the league.

The part we do know?

Whether it was his refusal to change the team’s name/mascot for decades, recent sexual harassment allegations within the organization, suing season ticket holders that were unable to pay during the 2008 recession despite a backlog of 200,000 people on the waiting list, his inability to stay out of personnel decisions and consistently put a winning team on the field, and more, Dan Snyder has quickly become one of the most polarizing owners in NFL history.

After two decades of dealing with him, albeit making a lot of money in the process, Fred Smith, Robert Rothman, and Dwight Schar finally put their foot down last year when Dan Snyder refused to pay out annual dividends and removed them from the team’s board.

The only problem?

When the three men went to sell their minority stakes, looking to cash in on significant franchise value appreciation, Snyder exercised his right of first refusal, offering to buy back the 25% held by Rothman and Smith, but not the 15% owned by Schar. Lawsuits and “smear campaigns” followed, but ultimately, it led us to today.

The part that interests me the most?

The $875M price tag.

Here’s what I mean…

Selling 40% of the franchise for $875M gives the team an implied valuation of $2.16 billion. That’s about 40% lower than the recent Forbes estimate of $3.5 billion.

Minority stakes in professional sports franchises always trade at a discount due to non-controlling interests and an illiquid market. Still, that’s a larger discount than normal.

Did the legal drama surrounding Snyder and the organization impact the price? How about the NFL seeing a $4B revenue hit due to COVID-19? Or maybe it has to do with limited options due to Snyder’s right of first refusal?

No one really knows for certain, but I bet it’s something other NFL owners are watching closely.

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

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