Saturday, March 31, 2012

$2.15 Billion? A Long Way from L.A. They May Be Wondering About Their Premium Costs

       By Ross Newhan

       Two insurance companies under the umbrella of Guggenheim Partners--the Chicago based financial services firm of which CEO Mark Walter is the principal money behind the new ownership group of the Dodgers--contributed about 60% of the $2.15 billion purchase price, according to multiple sources familiar with the situation but not authorized to discuss it publicly.

       The two companies are Security Benefit Life Insurance Company of Kansas and Guggenheim Life and Annuity Company of Indiana.

       Both companies were mentioned in one of my recent blogs.

      The reference in that case was to the fact that some major league owners were concerned about the structure of the Walter/Magic Johnson/Stan Kasten group and the industry being drawn into a relationship with a state or federally regulated company or companies, although there are wide-spread examples of such relationships in professional sports. The respective state insurance commissioners. Steve Robertson in Indiana and Sandy Praeger in Kansas, also had some concern about public money being used to help buy a baseball team, according to the sources.

      Obviously, the group sailed through baseball's vetting process and it's record bid derailed the anticipated auction and left the two other bidders with no chance at a counter offer. Now, of course, owners are salivating at the thought of how $2.15 billion may enhance their own franchise value.

     Similarly, Guggenheim's reputation and relationships with the insurance departments in the respective states (not to mention $125 billion in assets) eased any concerns that public money would be at risk, according to the sources.

     The bid by the newly minted Guggenheim Baseball Partners was 30% higher than any other bid, and the winning group is obviously counting on a potentially massive new television deal, a rejuvinated fan base, potential development in parking lot partnership with (ugh) Frank McCourt and new marketing and merchandising concepts created by longtime Hollywood executive and Mandalay Entertainment CEO Peter Guber.

    The latter and Johnson have been longtime friends and business partners, and it would not be a surprise to see marketing and merchandising concepts built around Magic as well as Matt Kemp.

    The new ownership's possible sweep of internal changes and what it can do to have an immediate impact on the field isn't clear. but you don't pay $2.15 billion without intending to improve the product and the environment.

    In the long-term, however, fans will have to help pay for it in one way or another, whether it's in the form of increased cable, ticket, concession and/or parking costs.

   In a question and answer story with Bill Shaikin of the L.A. Times on the night McCourt jumped at their bid and canceled the auction, Kasten and Magic said they had no plans to lower parking or beer prices in a gesture to fans who had grown dispirited under McCourt's ownership  (as new Angel owner Arte Moreno had lowered beer prices). Reading their negative reply one had to wonder "why not?".

   In Kansas and Indiana, meantime, a long way from Dodger Stadium, any increase in premiums may have people simply asking "why?".    

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