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Based on their market size, new stadium, and the limited number of pro sports franchises in Central Massachusetts, an economist specializing in sports teams estimates the sales price for the Worcester Red Sox is somewhere between $50 million and $70 million.
The WooSox officially announced Tuesday a majority ownership stake in the minor league baseball team will be sold to New York corporation Diamond Baseball Holdings by the current nine-person ownership group led by WooSox Chairman Larry Lucchino. When asked directly, the team declined to give the purchase price of the private transaction.
“Diamond Baseball Holdings does not comment on the financial terms of any acquisition,” WooSox spokesman Bill Wanless wrote in an email.
When Lucchino led a 10-member ownership group in buying the then Pawtucket Red Sox in 2015, the group didn’t disclose the purchase price, although it was later reported to be $25 million.
To gain further insight into how much the value of the team had matured since Lucchino’s group bought the team and moved it to Worcester in 2021, Worcester Business Journal asked Victor Matheson, a sports economist at the College of the Holy Cross, for his best estimation of the price of Tuesday’s announced sale.
“Putting together what we know, I would guess the sales price is somewhere between $50 and $70 million. That's a nice return of Lucchino investment that was basically paid for by Worcester taxpayers,” Matheson wrote in a Wednesday email to WBJ.
Roughly five or 10 years ago, the top minor league baseball teams were selling for around $40 million, and the WooSox are likely getting a premium bump in their valuation because of their stadium situation, Matheson said.
The WooSox play in the $160-million Polar Park baseball stadium, which is the most expensive minor league baseball stadium ever built. About 63% of the stadium cost is being paid for by the City of Worcester, and the terms of the WooSox’s 35-year lease are very favorable to the team, where the bulk of its financial responsibilities to the stadium costs aren’t due until the final years of the lease.
“The stadium piece is highly in the WooSox favor, which will likely lead to high attendance and high ticket prices for at least the next 5 years or so,” wrote Matheson, who has been critical of how much public money was used to build Polar Park..
Typically, profits are used to determine the value of a company for a potential sale, he wrote. For companies in the S&P 500, for example, the typical profit-to-earnings ratio is about 25, so a business with $2 million in annual profit will sell for $50 million.
“Of course, there is always speculation involved because no one really knows how much a firm will be making 5, 10, or 20 years into the future,” Matheson wrote.
For certain industries, including sports, valuations are more likely to be based on revenues instead of profits because those numbers are easier to determine.
“We know how many tickets the Sox sold and roughly how much seats are selling for, so revenues are easier to estimate. So sports teams often sell at a multiple of revenues instead of a multiple of profits,” he wrote.
In each of their three seasons in Worcester, the WooSox have ranked in the top 10 in paid attendance among the 120 minor league teams.
The three big factors driving sports teams’ revenues are their market size, their stadium situation, and the presence of other pro sports teams in the market, Matheson wrote.
“Worcester is not as good a minor league market as many of the other International League markets like Columbus, Indianapolis, and Nashville since Worcester is a much smaller city and metro area,” Matheson wrote.
However, the WooSox have an advantage over other teams in the International League because they have less competition from other sports franchises. In Columbus, the baseball team competes against NHL and MLS franchises, along with Ohio State University sports. The minor league baseball teams in Nashville and Indianapolis compete against NFL, NBA, and NHL franchises.
“Worcester has the Railers [hockey team] and Holy Cross, which are not at the same level of competition,” Matheson wrote. “On the other hand, the WooSox have an MLB option within 45 minutes, closer than any other International League teams other than St. Paul [Minnesota] and Gwinnett [Georgia].”
The big factor for the WooSox value, though, is Polar Park, said Matheson, which is why Lucchino and the ownership group might be getting a premium price.
“The new stadium, again roughly two-thirds paid for by Worcester taxpayers, has substantially improved the WooSox revenues, likely leading to a big increase in the value of the franchise that Lucchino and his partners are cashing in on,” Matheson wrote.
Diamond Baseball Holdings is only buying a majority stake in the WooSox and not purchasing the entire team outright. The WooSox are declining to disclose the exact percentage of the team that Diamond will own, so it’s difficult to determine how much each owner has made from the sale.
When Lucchino originally bought the PawSox in 2015, a total of 10 people owned the team. By the time the ballclub in 2018 announced its plan to move to Worcester, that ownership group had grown to 12 people. The following year, Ralph Crowley, the president and CEO of Worcester manufacturer Polar Beverages, joined the ownership group.
Some of those 13 people sold their stake in the WooSox prior to the Diamond sale because in November 2023, the team said the ownership group was composed of nine people.
In announcing the intended sale of the team to Diamond, the WooSox said Lucchino, Crowley, and Jim Skeffington Jr., president and CEO of Red Beam Partners in Boston, were staying on as part owners of the team.