Uncle John wants out.
John Bowlen, brother of Broncos’ principal owner Pat Bowlen, wishes to sell his minority interest that could command anywhere from $500 million to $800 million.
This does not necessarily mean the Bowlen Family ownership is beginning to splinter. In terms of controlling interest, John Bowlen and the Pat Bowlen Trust do not intersect, but run parallel.
John Bowlen’s minority interest – which has no voting or controlling rights – is not part of the Pat Bowlen Family Trust that contains 100 percent control of the Broncos.
There is strong evidence suggesting Broncos fans should be happy with their team’s trust set up. It has led to team president and chief executive officer Joe Ellis overseeing the day-to-day operations of the franchise and general manager John Elway running the football department since the start of the 2011 season.
In the 6 ¼ seasons since the Ellis-Elway team took charge, the Broncos have gone 70-30 in the regular season, won five AFC West Division titles, earned two Super Bowl appearances and won one world championship.
“Fans are always comfortable with the status quo of a successful franchise,’’ said Randy Vataha, a popular receiver of the New England Patriots in the 1970s who now runs Game Plan LLC, which represents buyers and sellers of sports franchises. “If there’s a change, that’s when they’re going to pay attention. With a team like Denver, I’m sure the fans are completely comfortable with how it’s been run to this point. It’s a great franchise. They compete every year.’’
A new owner, in other words, has a greater chance of messing up the Broncos than improving the overall state of the team. Ask yourself this, Broncos fans: Would you rather have an audacious billionaire like Daniel Snyder running the team, or the Pat Bowlen Trust?
Still, there is controlling interest and there is cash. John Bowlen’s stake has considerable cash value. As it stands now, John Bowlen believes he holds 31 to 35 percent of the Broncos’ financial ownership -- all of which, to reiterate, is classified in a non-controlling minority interest. None of that financial value falls under the umbrella of the Pat Bowlen Family Trust.
With Pat Bowlen battling Alzheimer’s Disease, his trust is run by three trustees: Joe Ellis, the Broncos’ chief executive officer and president; Rich Slivka, the Broncos’ executive general counsel, and Mary Kelly, a local attorney who has previously represented Pat Bowlen in legal affairs.
The trust lists his seven children as beneficiaries. His two oldest daughters Amie and Beth are from his first marriage to Sally Parker. Pat and his second wife Annabel have five children: sons Patrick III and John, and daughters Brittany, Annabel and Christianna.
One of these seven is to run the Broncos, according to the wishes of Pat Bowlen and the plan currently being carried out by the trustees.
Ellis recently received a contract extension. Considering Elway in late-July received a new five-year deal that runs through 2021, it figures that Ellis’ new contract extends at least that long.
Broncos’ football operations figure to be status quo for a while.
What’s new is John Bowlen wants out as minority partner.
“I want to make this very, very clear: This has nothing to do with what Joe or Rich are doing,’’ Kerry Bowlen, John’s wife, told 9NEWS last week. “There’s no animosity at all. It’s just John and Pat were always partners. And now that Pat is no longer involved with running the team, it’s just purely time to go. Let a new owner come in. And for us financially, spiritually, it’s time as well.’’
Let’s put John Bowlen’s share at 31 percent. Forbes Magazine recently put the Broncos value at $2.4 billion -- and the publication has been mostly low in its assessments compared to the ultimate sales of sports franchises. For instance, in August 2014, Forbes listed the Buffalo Bills’ value at $935 million. A month later, Terry and Kim Pegula bought the franchise for $1.4 billion.
Still, using Forbes’ $2.4 billion as the starting point for the Broncos’ total franchise value, John Bowlen could begin by asking for roughly $740.4 million.
Will it sell? It won’t be easy because that’s a lot of loot for no say. Tennessee Titans minority owner Susie Adams Smith has been trying to sell her share of the team.
One attorney who has put together several sports ownership deals says John Bowlen would probably have to give a discount because his interest has no voting rights or controlling interest.
It does not appear John Bowlen’s minority interest includes a right-of-first-refusal clause should the trustees decided to put the team’s controlling interest for sale. Right of first refusal would be a huge component in the sale price.
Without it, instead of $740.4 million, John Bowlen might have to settle for, say, $500 million or $600 million. That’s still a lot of money for no control, and possibly no first-refusal rights. Will there be interest, anyway?
“I would think, a lot,’’ Vataha said. “It’s always hard when you get to that level of value that you’re talking about -- several hundred million dollars no matter how you look at it to be a non-controlling owner. That’s always a major factor in getting a deal done. But I think there will be great interest. You don’t know what the sale number is but there will be real interest. I think a deal gets done. That’s a great franchise.’’
What would multiple bidders do the sale price – could it go past $740 million to $800 million?
Even if John Bowlen is only offering an economic interest, there’s reason for a person worth a couple billion to consider it a good investment.
Consider that Forbes says the Broncos are the 24th most valued professional sports franchise with their $2.4 billion figure, and that the franchises ranked ahead of them all play in considerably larger markets than Denver.
More significantly, the Broncos’ value soared 24 percent from the previous year. Only the Los Angeles Rams and NBA’s Golden State Warriors had a greater percentage increase among the top 24 sports franchises.
So the Broncos are not only highly valued, they’re hot.
Consider also that sports franchises have also been fairly recession proof. Their value has increased at a far greater rate than, say, the S&P 500.
This helps explain why minority, non-controlling, sports partnerships have become popular in recent years. Will Farrell, Will and Jada Pinkett Smith, Justin Timberlake, Peyton Manning’s wife Ashley, Gloria Estefan, Marc Anthony, Bill Maher, Serena and Venus Williams, Fergie, Nelly, Usher and Jay-Z are among the celebrities who own minority shares in sports franchises.
A buyer of John Bowlen’s minority interest could be in better position to purchase the team outright if eventually the Pat Bowlen Trust sells the Broncos on behalf of the children. First, a minority owner would have already passed NFL inspection.
Secondly, the trustees do have a fiduciary responsibility to operate in the best interest of the beneficiaries. If someone comes along and offers to buy the Broncos for $3 billion, Ellis, Slivka and Kelly would be obligated to approach the children and ask, what do you think?
Who would have the financial wherewithal to purchase a minority stake in the Broncos for anywhere from $500 million to $800 million?
Vataha said the new partner wouldn’t want to take out a loan for the purchase because the interest would slice too far into the potential investment gains. To come up with the kind of liquidity necessary to pull off such a purchase, someone would need the ability to cash in other assets.
“You would think it would be somebody with multi-billion net worth,’’ Vataha said. “If you get down to a billion dollars you’re talking quite a bit of liquidity of assets to buy this.
“I’m also not sure is does this all have to be sold as one piece. Can you sell it to a group? I’ll put six guys together and they all buy 5 percent (of the team’s total ownership). That does happen in the NFL. Quietly, but it does happen.’’
Because all minority owners require NFL approval, a group of multiple buyers for John Bowlen’s interest could get unwieldy. He’s hoping to sell to one or two investors.
Forbes Magazine says there are 2,043 billionaires in the world. Start there. John Bowlen has Canadian ties so perhaps he can reach out to David Thomson, who runs Canada-based Thomson Reuters and is worth $27.2 billion.
Billionaires with Colorado ties include Charlie Ergin, of the DISH Network; Philip Anschutz, a diversified investor who owns stakes in the NBA Los Angeles Lakers and NHL’s L.A. Kings; John Malone, the cable magnate who already owns the Atlanta Braves of Major League Baseball; James Leprino, the mozzarella cheese king; Pat Stryker, a venture capital, real-estate developer; and Gary Magness, whose stepmother Sharon owns Thunder, the Broncos’ mascot.
9NEWS reached out to local oil and gas magnate George Solich, who sent along a “no comment” to the inquiry of whether he would be interested in John Bowlen’s stake.
“A buyer could be thinking if I buy it at a good price now, when the whole team goes up for sale, I’ve already got 30 percent at a better price than the ultimate price,’’ Vataha said. “You’ll need to understand all the financials, how the trust works because you buy that minority interest now and somebody else could be running the team in two years.’’
Again, the Pat Bowlen Trust plans on keeping the Broncos’ controlling interest in the family. But it appears the trustees and beneficiaries are about to say goodbye to uncle John, and welcome in a new minority business partner.