Sixth Street’s $3.8B Giants Deal May Cost Fans
Plus: We argue why the IRS should keep the ‘DA’ in ‘EBITDA’ and outline portco M&A and exits from last week.
Amongst the Giants.
Sixth Street Partners has acquired a 10 percent stake in the San Francisco Giants, valuing the major league baseball team at $3.8 billion.
The Giants claim the capital will be used to enhance its home field, Oracle Park, to improve training facilities, and to support nearby real estate development, including the development of a nearby mixed-used neighborhood called Mission Rock.
Spurned.
This isn’t Sixth Partners’ first foray into sports teams. Other investments for the firm include Bay FC, the San Antonio Spurs, Real Madrid, and FC Barcelona.
The longest-standing investment of the bunch is the San Antonio Spurs, an NBA team in which Sixth Street Partners acquired a minority stake in 2021, valuing the franchise at $1.8 billion.
Since the deal was struck, the Spurs have become much more profitable. Between the 2021/22 season and the 2023/24 season, the team’s revenue increased from $306 million to $363 million, while its operating income jumped from $99 million to $118 million.
Meanwhile, the team started spending more on players, leading to one of its best seasons in decades in 2023/24 due to the drafting of Victor Wembanyama. In fact, the Spurs’ star player may become the first NBA player to make over $1 billion just off of NBA salary alone.
All that glitters.
Higher revenue and income coupled with higher spending has meant that money has had to come from somewhere, though — and that is fans’ pockets. For the 2024-25 season, fans complained that season ticket prices increased between 16 and 25 percent.
The team’s revenue per fan was $54 in February 2021, before Sixth Street Partners bought its stake. As of October 2024, that figure amounts to $70 per fan.
Sixth Street declined to comment for this piece.
PE portcos also saw some full and partial exits last week, as well as some exits-to-be:
PartnerOne acquired NetWitness, a cybersecurity company, from Clearlake Capital-backed RSA Security for an unknown sum.
Avenue Capital Group’s Middle River sold 1.9 GW of natural gas power plants to Partners Group for $2.2 billion.
Wabtec Corporation bought Dellner Couplers, a company specializing in railway coupling technology, from EQT. No financial terms were disclosed.
Cinven completed a €3.5 billion ($3.78 billion) exit from insurance company Viridium to a consortium of investors including Allianz, BlackRock, and T&D Holdings.
CDPQ sold Qima, a compliance solutions provider, to TA Associates for an unknown amount.
Meanwhile, portco M&A was in full swing:
Astorg-backed Steliau, an electronic solutions specialist, bought German peer UX Gruppe for an undisclosed sum.
Clario — a clinical trial technology company formed via a merger of ERT and Bioclinica in 2021 and owned by Astorg, Nordic Capital, Novo Holdings, and Cinven — acquired imaging provider NeuroRx. Financial details of the transaction were not disclosed.
Guess? Inc. received a going-private proposal from Ares-backed WHP Global. The company is offering $13 per share, or a $751.5 million valuation — nearly a $100 million premium.
EQT’s Scale Microgrids bought a 9.6-megawatt combined heat and power fuel cell project from HyAxiom, Connecticut’s largest fuel cell manufacturer. Financial details were not disclosed.
Berkshire-backed Forcura and Vistria-backed Medalogix merged to create a platform for post-acute care technology. Financial details were not disclosed. Berkshire Partners will be the majority owner of the new entity, while Vistria will be the largest minority shareholder.
Perforce, a DevOps performance software owned by Clearlake Capital and Francisco Partners, acquired Snowtrack, a software provider for application designers, for an unknown sum.
Ares-backed Interstate Waste Services expanded its waste management market presence via an acquisition of Pinto Service, a northern New Jersey-based waste management company in northern New Jersey. No specific financial details were provided.
Arlington Capital’s defense analytics platform, Systems Planning & Analysis (SPA), acquired Intrepid, a missile engineering company. No financial details were disclosed.
Two necessary letters.
Private equity’s push to get the IRS to drop the “DA” from “EBITDA” when calculating tax obligations is an obvious cash grab. The assertion that PE-backed firms need a government bailout to service their debt while their sponsors sit on a record $500 billion in dry powder is laughable.
The most impactful way for the government to reduce PE-backed companies’ debt burdens would be to require higher minimum equity ratios for leveraged buyouts. Additionally, while we shouldn’t completely get rid of the concept of limited liability for GPs — moderate risk-taking should be incentivized in the industry — there should be more legal damages incurred by private equity firms that load portcos up with blatantly unserviceable debt.
But private equity will never lobby for the latter.
Reducing the cost of debt for portfolio companies is important, yes. But increasing the government’s deficit is not the answer.
See you next week!