Late last year, the Pac-12 began to seek investment in the conference, with an initially reported price of $500 million for 10% of the conference’s equity. One hedge fund manager was not optimistic about the conference being able to attract any investment on those terms, but instead of backing off, the Pac-12 went in deeper – it changed the proposed terms to $750 million for a 15% stake. That kept the conference’s valuation at $5 billion, but required more investment from potential investors, including a 25-year commitment.
We all pointed at the conference and chuckled about how optimistic it was, but maybe we’re going to be the ones looking like idiots after all the smoke clears. According to the Sports Business Journal, not only has the Pac-12 received interest from potential investors, the conference has actually received bids.
The Pac-12 already has multiple bids of at least $750 million in hand from companies looking to become equity investors in the conference. Over the next few months, it will work with consultant Raine Group to narrow the field down to a potential partner.
The numbers are based on the valuation for NewCo, which is the holding company for the conference’s media rights and networks. For example, a bidder who valued NewCo at $5 billion would invest $750 million in exchange for a 15% equity stake. Sources say that the conference has received multiple bids based on a valuation of $5 billion or more. To have bids come in at those numbers is encouraging for the conference’s leaders.
To throw another wrench into the plan, the Pac-12 isn’t going to force a deal through even though several parties are interested, and this potential investment plan is going to take a significant amount of time to come to fruition (if it does at all).
Does that mean the Pac-12 is fully committed to partnering with an investor? No. In fact, Commissioner Larry Scott has said that the conference might go through this process and decide to do nothing. Because this is uncharted territory for a conference, the process is moving slow, but the Pac-12 presidents decided at their last meeting in May to keep moving forward. Colorado Chancellor Phil DiStefano, who chairs the conference CEOs, told reporters that there has been “significant interest from some of the most respected companies investing in this space … from traditional players to technology companies.”
The Pac-12, and the Pac-12 Networks as a whole, has been the butt of plenty of jokes in recent years. The revenue projections for the networks took a hit in 2019, and payouts to the conference’s schools are expected to remain flat. Each Pac-12 school receives a far lower payout from the conference than schools in other major conferences, most notably the Big 10 and SEC. Getting this extra investment will undoubtedly help the conference in both the short and long term, but schools looking for some extra relief over the summer will likely end up disappointed.