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Investment firm Warburg Pincus negotiating with MLS for team's operating rights.
By RODNEY PAGE
© St. Petersburg Times, published July 12, 2000
When D.C. United hosts the Mutiny tonight, investment firm E.M. Warburg, Pincus and Co. might take notice of two potential investments.
The New York-based company is negotiating with Major League Soccer to obtain the operating rights to D.C. United and the Mutiny. The sides are said to be closer than ever.
"A couple of issues need to be resolved at the league level, and they will be resolved," United president and general manager Kevin Payne told the Washington Post.
The asking price for United, owned by the Washington Soccer Limited Partnership, reportedly is between $25-million and $30-million. The price for the Mutiny is expected to be less. Warburg Pincus could obtain rights to both teams because MLS operates under a single-entity structure with investors buying shares of the league. Major investors can gain operating rights to one or more teams.
An announcement on D.C. could come soon. Negotiations for the Mutiny might take longer. The MLS Board of Governors meets July 28 in Columbus, Ohio, as part of MLS All-Star weekend. A decision before that seems unlikely.
"There's nothing new that has developed," MLS chief operating officer Mark Abbott said. "These are very delicate negotiations, and we'd rather not say anything yet."
Warburg Pincus isn't saying anything, either. But the Mutiny possibly having an owner soon is a giant stride forward for the team.
As one of only two MLS teams still operated by the league -- Dallas is the other -- the Mutiny has lost close to $6-million in its four-plus years in MLS. It lost $2-million in 1998. It lost nearly half that last season.
For most games this season, attendance has hovered around 6,000. July 4 attendance was more than 18,000, boosted the Mutiny's average to 9,816 for 10 home games, 10th in the 12-team league.
Those are not numbers that would seem to lure an investor. But Warburg Pincus is a big-bucks company that has flirted with soccer ownership before.
Warburg Pincus is one of the world's leading private-equity investment firms. It has invested more than $9-billion in more than 350 companies in 26 countries.
Last fall the company was close to purchasing English Premier League team Everton; negotiations fell through.
"They do all sorts of stuff," Prudential Securities analyst John A. Hall said. "If they see an opportunity in an underexposed market, they'll get involved. They don't get into something if they can't make money."
Should the sales become official, the company would not be the only operator of multiple teams in MLS. Lamar Hunt operates Columbus and Kansas City. Robert Kraft is operator of San Jose and New England. Philip F. Anschutz is operator of Colorado, Los Angeles and Chicago.
Team operators split local revenue 50/50 with the league. Players are under contract to the league, which pays their salaries.
League profits and losses are shared equally among the owners.
No front office changes for either D.C. or the Mutiny are expected if Warburg Pincus comes on board. What an operator could give a team is a strong voice in local and league negotiations.
"You will no longer see any conflict-of-interest conspiracy theories, for one," Mutiny general manager Bill Manning said, referring to the trade of Raul Diaz Arce to United in May. The trade raised eyebrows because Diaz Arce, an El Salvador native, was sent to a team with a large Salvadoran fan base. "I think there will be an opportunity for this franchise to not look a year or two down the road but to look 10 years down the road and possibly have a stadium development," Manning said. "Ownership for this franchise is so important.
"It's pleasing to know that the company looking at us is very forward thinking and they are looking at a long-range plan."
Not everyone believes an operator for the Mutiny is essential. Former general manager Nick Sakiewicz, now in the same capacity with New York/New Jersey, said Tampa Bay could survive under league ownership, though having an operator has advantages.
"Quite frankly, I think not having an owner is just an excuse," Sakiewicz said. "Never have I been pressured by the league to make player moves or do anything else. In 1997, (Tampa Bay was) a bad team, but that was all me and (coach John) Kowalski. We made those mistakes, not the league. I think too many guys in our league are not willing to look in the mirror and take responsibility for the things they do.
"Ownership is important; don't get me wrong. It will take the Mutiny to the next level. It will give them some muscle if they want to build a new stadium. But not having an owner isn't a bad thing, either."
Manning believes the Mutiny will not be a money-loser for long. And with the strong backing of an operator, he thinks the Mutiny will be around for a long time.
"This team has a lot of possibilities," Manning said. "These were the things when I met with (MLS commissioner) Don Garber (before being hired in January) that he told me about. That's part of the reason I came here instead of going elsewhere. Now it's coming to fruition.
"I think next year we're going to show the largest percentage of increase in attendance (of) any team in MLS. I can't tell you how confident I am about that. I think that's because the staff is intact. Next year I think we'll do a million dollars in sponsorship sales. In the past, we haven't come close to that."