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Magic Johnson rides to Dodgers rescue – and all L.A. is smiling

A group of investors fronted by Los Angeles basketball legend Magic Johnson has bought the bankrupt Dodgers for $2 billion, nearly twice the previous record for a US sports team.

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The group won a bid in auction in US Bankruptcy Court over two other finalists – hedge-fund billionaire Steve Cohen and billionaire Patrick Soon-Shiong and St. Louis Rams owner Stan Kroenke.

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The deal will enable outgoing owner Frank McCourt to emerge from Chapter 11 bankruptcy. He had purchased the team and land in 2004 for $430 million and retained sole ownership after a very bitter and public divorce from his wife, Jamie McCourt, who was fired from her position as CEO of the Dodgers in 2009. Major League Baseball assumed day-to-day control of the Dodgers in April 2011, citing “deep concerns regarding the finances and operations of the Dodgers,” in the words of Commissioner Bud Selig.

The episode, in which the league tried to keep one of its storied franchises afloat, was considered a black eye for both the Dodgers and Major League Baseball.

As such, the analysis is that the pending sale will be good for both.

“I suspect the only potential losers in this move will be the Angels of Anaheim as they go forward in their bid to become L.A.’s team,” says Frank Shorr, director of The Sports Institute at Boston University, in an e-mail. “As both an athlete and an economic contributor to the community, Magic Johnson has come to represent all that’s good…. The group that has purchased the team couldn’t have picked a better frontman in their effort.”

Transfer of the team will be formally completed by the end of April and is subject to approval in bankruptcy court, which analysts say is likely because all of McCourt’s creditors can now be paid in full.

Some analysts see other motivations for Major League Baseball that sweeten the deal.

“Magic Johnson's inclusion might also be a signal of MLB's desire to regain some of their lost prominence in the African-American community, where football and basketball are king,” says Justin Harmon, associate professor with the entertainment, sport, and promotion management (ESPM) program at Northwood University.

Some analysts see a potential down side.

“With the ownership paying $2B for the franchise, they will likely need to recoup their investment through increased revenue generation,” says Patrick Ryan Murphy, assistant professor of accounting, finance, and economics at St. Leo University in Florida, via e-mail. That could mean “fans will have to bear the burden of higher ticket, concessions, merchandise, and parking prices.”

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