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The Philadelphia Phillies recently raised close to $500 million in capital from three new investors in a transaction that values the Major League Baseball team and its 25% stake in regional sports network NBC Sports Philadelphia at about $3 billion, according to two people familiar with the deal.
As part of the transaction, two existing owners, managing partner John Middleton and Stanley Middleman, also invested more money in the Phillies, bringing the total capital infusion to close to $600 million, according to the people.
On Nov. 1, Middleton announced new investors, including Mitchell Morgan and Guntram Weissenberger Jr., would be joining the Phillies. The size of the investment and the third investor were not disclosed.
Given that limited-partner stakes typically go for about 20% less than control stakes because LPs have no say in how the team is run, the $3 billion valuation equates to roughly a $3.7 billion control valuation.
That is an impressive number considering the Baltimore Orioles were sold for $1.73 billion earlier this year and the most ever paid for a baseball team was the $2.42 billion that Steve Cohen paid for the New York Mets in 2020.
A little more than a year ago, Middleman purchased a 16.25% stake in the Phillies at a grossed up valuation of $2.8 billion.
Based on revenue multiples, a $3.7 billion control valuation for the Phillies would be eight times 2023 revenue, compared with multiples of 5.3 for the Orioles and 6.7 for the Mets, according to historic revenue calculations.
The Phillies have one of the best local television deals in baseball. In 2014, the team inked a deal with NBC Sports Philadelphia that guaranteed the team an average of $100 million a year in rights fees over 25 years, plus a 25% stake in the regional sports network.
However, cord-cutting has resulted in tougher economics for regional sports networks, the most egregious example being Diamond Sports Group, which filed for Chapter 11 bankruptcy protection in March 2023. As pay-TV revenues fall, some baseball teams could see a reduction in their television revenue.
The Phillies’ exposure to that risk is lower, since Comcast owns 75% of the regional sports network.
It is not known what the Phillies will use the proceeds from the capital raise for, but there has been some speculation that the team could go after free agent Juan Soto.
Nabbing Soto, who could get between $50 million and $70 million a year, would likely land the team a huge luxury tax bill. Last season, the Phillies, who are led by superstar Bryce Harper, had a payroll of $262 million, the fourth-highest in baseball, according to Cot’s Baseball Contracts. The team is on the hook for a luxury tax, formerly known as the competitive balance tax, of $10 million, according to Spotrac.
The Phillies have a payroll of $240 million heading into the 2025 season, according to Cot’s. The MLB luxury tax limit is set at $241 million.
Prior to this capital raise, the Middleton family owned 48.75% of the Phillies, the Buck family owned 32.5% and the Middleman family owned 16.25%, according to a person familiar with the team’s ownership. Pat Gillick owned 1.5%, and David Montgomery owned 1%, the person said.
It is not clear what the precise ownership interests are after the capital raise.
A spokesperson for MLB did not respond to CNBC’s request for comment. A spokesperson for the Phillies declined to comment, as did a spokesperson for Galatioto Sports Partners, the advisory firm that represented the Phillies on the capital raise.
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.