Atlanta Braves success over the past five seasons and challenges in other areas convinced Liberty Media to split-off the Braves Group.
As Eric wrote a week ago, Liberty Media Corp (LMC) is rearranging its assets, and according to the Hollywood Reporter. among those changes is splitting off (the Split-off) the Braves Group and creating a new, asset-based company. Atlanta Braves Holdings Inc.
LMC’s press release said that splitting-off the Braves Group allows LMC to recapitalize its remaining common stock into three tracking groups; Live Nation, Liberty SiriusXM, and Formula One. According to Investopedia:
"Recapitalization is the restructuring of a company’s debt and equity ratio. The purpose of recapitalization is to stabilize a company’s capital structure."
Sirius XM is an entertainment mish-mash that includes Live Nation, Pandora, Ticketmaster, Sound Cloud, and other similar smaller segments. According to LMCs’ 2020 and 2021 SEC (10-K) filings, the pandemic hit Sirius XM Group and the Formula One Group, in particular, hard.
| Operating Income | $2,018 | $2,019 | $2,020 | $2,021 |
| Liberty Sirius XM Group | $1,620 | $1,610 | $790 | $1,917 |
| Formula One Group | $68 | $17 | $386 | $92 |
LMC will issue new common stock in Liberty Live, Liberty Formula One, and Liberty Sirius XM, bringing in cash to improve their Asset to debt ratio.
So, that’s the why, but what does that mean for the Atlanta Braves?
Atlanta Braves Holdings
While the Braves group also ended the year with a net loss, it rebounded quickly, winning the 2021 World Series and the 2022 NL East title. Splitting the group off protects its assets and income and allows LMS to split Live Nation into a separate group to protect Sirius XM.
According to LMC’s press release linked above, Atlanta Braves Holdings (ABH) inherits all things Braves related from LMC.
"Atlanta Braves Holdings would hold all of the businesses, assets and liabilities currently attributed to the Braves Group, including Braves Holdings, LLC, which is the direct or indirect owner and operator of the Atlanta Braves Major League Baseball Club, certain assets and liabilities associated with the Atlanta Braves’ stadium and mixed use development project, The Battery Atlanta, and corporate cash."
LMC will exchange their shares in the Braves Group for shares in ABH and remain majority shareholders. The type and number of shares haven’t been determined.
Why would fans care?
To clarify what this means for the Atlanta Braves, after the Split-Off, LMC and ABH will become separate, publicly traded companies.
Like all publicly traded companies, ABH will have the option of offering shares stock – not tracking stock, common stock – to bring capital into the company. Yes, you too can become part a shareholder in your Atlanta Braves.
There’s very little risk in owning shares of a franchise in any major sport, and the value of MLB franchises continues to grow by leaps and bounds. I suspect LMC is hoping a lot of us take them up on their offer because Greg Maffei pointed out the unbridled increase in value in the Hollywood Reporter piece linked earlier.
"“ . . .Baltimore and Washington are rumored to be contemplating a sale. We’d argue. . .that the Braves are a far more attractive asset.” . . . He pointed to the Los Angeles Angels exploring a possible sale . . .for around $3 billion . . .“We’ll see. But each new deal seems to set a new benchmark for sports assets, and the valuations as a multiple of revenue seem to continue to go up.”"
The split-off isn’t a precursor to an eminent sale. Instead, it’s a way to allow the Atlanta Braves franchise to determine its future without wondering if and when the owner might choose to sell.
Top-five payroll franchise?
Over the past three seasons, we’ve heard quotes from leadership indicating their goal is to have the Atlanta Braves playing at the deep end of the pool in the next five years, and the club isn’t far from that goal now.
Spotrac lists the Atlanta Braves as a team with the second-highest committed payroll today. Depending on your source, the Braves are projecting between $225M and $228M in CBT payroll and almost certainly will fly past the first CBT threshold of $233M.
However, the payroll number day isn’t close to the final amount for perennial high-end teams.
The Mets are already projected with a $246.5M CBT payroll and have seven 40-man roster spots to fill. The club could surpass the so-called Cohen tax and hit $300M in 2023.
The Padres are down seven players from a full 40-man roster with two potentially expensive holes to fill. It’s the same story for the Dodgers – four players short, and at least two may get expensive – and Houston is five players down but may not have to hand out huge contracts to fill them.
The way the pre-winter meeting talk is going, the Braves could squeak into the top five this year and will definitely make the top seven.
That’s a wrap
The trick for Alex Anthopoulos and the rest of Atlanta Braves’ leadership is maintaining competitiveness without going dollar-crazy. The new CBA takes draft picks and international pool money away from free repeat CBT payors. While prospects don’t win games, they are the only way to keep a franchise consistently competitive.
In the meantime, I’m saving up to buy shares in ABH. How about you?