New England Sports Ventures (NESV), the group that owns the Red Sox among other businesses, recently purchased the Liverpool Football Club (LFC) for $476 million or at a discount of roughly 40% according to Forbes. The business publication valued LFC at $822 million. I think we know why John Henry and his partners wanted to own the football club.
NESV got a such a good deal on LFC because the previous owners, George Gillett Jr. and Tom Hicks, could not make their acquisition debt payment. It appears that the pair purchased LFC by leveraging the team or using it as collateral. Essentially, Gillett and Hicks were foreclosed on and their house (LFC) was sold at a below market rate to make the creditors whole.
As Red Sox fans, we are not concerned about LFC. We want to know if this purchase will financially restrain the Olde Towne Team from signing this winter’s best free agents.
It could negatively affect the product at Fenway since the most of the debt will probably not be the LFC books, assuming it was not primarily purchased from excess cash. It was made clear that…“No debt will be loaded on to the club, and no money will be taken out of the club, in any way, to service their cost of buying it. That is a clear pledge…”
If Red Sox, NESN and other team related operating margins are being planned on to finance the purchase of LFC, then it could FURTHER reduce the desire to go the extra mile or rather dollar for a Mark Teixeira or Alex Rodriguez. But that is nothing new.
The Red Sox only sign free agents that make financial sense for them, which usually means they get outbid by the Yankees and Mets. If player X is going to be four wins over player Y and that will bring in $15 million, then the Red Sox top offer is $15 million. But in New York, those extra four wins will generate $20 million, so Johnny Damon heads south.
Unless Red Sox related revenues fall to extreme levels, which is highly doubtful with NESN and their strong core of players, debt service for the acquisition of LFC will probably not have a negative impact on attaining the next hot free agent. The NESV philosophy of player acquisition has a much bigger impact. Team revenues pay for player costs. As Henry said after purchasing LFC, “I don’t have ‘Sheikh’ in front of my name…We look at revenues in sports as being the ability to send out a strong team on the field.”