RedBird Capital wants to sell its stake in NFL, MLB players’ union firm – a risky business worth up to $2 billion

Private investment firm RedBird Capital wants to unload its 40% stake in OneTeam Partners, a firm mainly run by the National Football League Players Association, people familiar with the matter told CNBC.

RedBird founder, Gerry Cardinale, invested in OneTeam in 2019. Wall Street bankers are floating its enterprise value is up to $2 billion. The Athletic first reported the company was seeking to sell.

Two of the individuals who discussed the matter believe the $2 billion figure is undervalued, but if correct, RedBird’s stake increased to roughly $800 million in less than two years. Chatter in sports business circles suggests the firm surpassed its goal and is ready to cash out. OneTeam started with $125 million in funding, according to Crunchbase.

But potential buyers of RedBird’s stake should keep in mind that OneTeam is a risky enterprise filled with union politics.

OneTeam is a licensing and business arm for player associations. The firm leverages name, image and likeness (NIL) as a group, manages players’ intellectual property and invests in newer companies on the union’s behalf.

It was founded by the NFLPA and Major League Baseball Players Association, launched in 2019, and now oversees established licensing agreements with top companies including Electronic Arts, maker of the Madden video game franchise, Take-Two Interactive and Sony. Companies need unions and pay a rights fee for their products. Video games, sports apparel, trading cards, and merchandise are historically the top four drivers in sports licensing.

RedBird’s role in the partnership includes negotiating terms for OneTeam, finding new collective rights opportunities and growing value. It makes a percentage of the return from revenue. The firm is betting the NIL space will explode with colleges coming online, and thinks non-fungible tokens (NFTs) will play a factor. Add in the built-in licensing deals from the aforementioned companies, and it sees value with OneTeam.

Sports bankers call OneTeam the 33rd NFL team – meaning it holds value for unions, especially in football because it allows them to share equally in a portion of league revenues.

OneTeam’s assets, including the Major League Soccer and Women’s National Basketball Association players’ unions, look good on paper. But it’s missing an essential asset – the NBA players association. 

The NBA is the most internationally marketable organization of the four major U.S. sports leagues. NBA players are more recognizable, have prominent social media followings and have better national and global appeal. That allows companies to activate better sponsorships and leverage licensing deals. The league also has a younger fanbase and is ahead in the NFT space, which has cooled off.

But the NBPA operates its licensing division internally and doesn’t need OneTeam. But, OneTeam could thrive should it eventually capture both NBA and hockey unions. And popularity around women’s sports is also on the rise, which can help increase revenue if those leagues grow. 

For now, though, NFL and MLB are the core unions at OneTeam. Baseball players have shown little interest in enhancing their marketability. And in football, striking deals with both the NFL and the players union can be expensive for companies, since the league commands top dollar.

In addition, getting star NFL players to activate partnerships is a challenge, according to people familiar with NFLPA operations. Generating future revenue around just NFLPA and MLBPA licensing, and NIL, will be difficult for OneTeam.

The firm has interesting plans around the esports space. But it needs the NBA players and global soccer unions, too.

Potential buyers may also need to brace for more tension inside the unions.

In the NFLPA, the future of executive director DeMaurice Smith, who helped form OneTeam and holds a board seat, remains blurry. Some players are still unhappy about the new 10-year collective bargaining agreement and could look to replace him.

On the MLBPA’s front, their collective bargaining agreement with team owners is set to expire on Dec. 1, and a lockout will hurt baseball. It’s unclear what will happen with OneTeam with MLB games beyond 2021 at risk and if Smith is replaced. And this comes following a major restructuring of licensing deals due to the pandemic, which killed sports-related revenues.

There’s also a concern around RedBird’s ties to the MLB.

In March, RedBird took a minority share in Fenway Sports Group, which owns the Boston Red Sox. That deal included NBA star, LeBron James. It’s a non-controlling stake, but considering the rocky history of MLB players and owners, double-dipping in the baseball business is tricky.

RedBird is technically a team owner now and has an interest in player affairs with OneTeam. Individuals familiar with the matter told CNBC RedBird isn’t being forced to sell its position in OneTeam due to concerns about MLB team ownership. But it puts MLBPA executive director Tony Clark, who also has a board seat with OneTeam, in an awkward position.

MLB, NFLPA and RedBird did not respond to CNBC’s requests for comment.

In sports business circles, the timing and valuation of RedBird’s stake in OneTeam is questionable. If the future is so bright, why is RedBird looking to sell?

This is fiduciary capital, and when discussing the NBA’s private equity play, a Wall Street CEO noted firms like RedBird don’t make a return on fiduciary money until they sell something. Cardinale’s history of transactions includes selling RedBird’s stake in On Location Experiences to Endeavor in 2020. That was a combined $70 million investment made in 2015, and it returned over $600 million, according to Bloomberg.

So, Cardinale has a history of cashing out when the timing is right. But it’s unclear if RedBird will get nearly $800 million for OneTeam’s stake, even with his track record.

But maybe another investment firm like BlackRock Capital, which some sources floated as a potential buyer, see the same potential that RedBird does. But no matter what firm buys it, the company will have to be willing to navigate the risks within the unions and sports leagues.