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3 Years : From Dec 2011 to Dec 2014
By Liz Moyer
NEW YORK--Goldman Sachs Group Inc.'s (GS) sale of much of its stake in YES Network caps the career of Gerald J. Cardinale, a Goldman partner who orchestrated the creation of the largest regional sports network 11 years ago and who is set to retire at the end of this year.
News Corp. (NWS) announced Tuesday it would buy a 49% stake in The Yankees Entertainment and Sports Network from a group of investors that includes Goldman. The sale allows the owners to reduce their stakes in the network, and after three years, News Corp., the parent company of Dow Jones Newswires and The Wall Street Journal, could bring its ownership to 80%.
Goldman's stake is currently 30%, while Providence Equity Partners holds 7%, the Yankees own 34% and a group including former owners of the Nets holds 24%.
The deal values YES at around $3 billion, The Wall Street Journal reported Tuesday. A person familiar with the matter said the original investors would make five times their money selling YES.
Goldman invested $335 million in YES in 2001, when the concept of a regional sports network was new. Mr. Cardinale wrote the business plan for the network and helped get the business off the ground, despite the economic instability that occurred in late 2001 and early 2002 after the Sept. 11, 2001, terror attacks.
Goldman's backing of the YES Network had been announced on Sept. 10, 2001.
The Yankees have been a big client for Mr. Cardinale and Goldman, which not only originally invested in YES but helped finance the construction of the new Yankee Stadium, which opened in 2009. Goldman also helped the Yankees and Dallas Cowboys create Legends Hospitality Management, a concessions services business, in 2008. Goldman has since sold its stake in Legends.
Mr. Cardinale is planning to retire at the end of this year after a 20-year career at Goldman, eight of them as a partner.
In a memorandum earlier this year announcing his plans to retire, Goldman said he was responsible for $6 billion of investments during his career at the firm. He even helped negotiate third baseman Alex Rodriguez's contract with the Yankees in 2007.
Goldman shopped its stake in YES five years ago, though a deal never materialized.
Regional sports networks have helped boost the value of professional sports franchises. Earlier this year, the Los Angeles Dodgers fetched a $2.15 billion sale price from an investor group that includes former L.A. Lakers star Earvin "Magic" Johnson and the investment banker Mark Walter, chief executive of Guggenheim Partners. In addition to the team and real estate, a big attraction was the potentially lucrative media opportunities.
Goldman Sachs Capital Partners, the firm's private-equity investment vehicle, has had a series of funds that have collectively invested $39.6 billion since 1992. Its current fund, GS Capital Partners VI is $20.3 billion. Its GS Capital Partners 2000 fund, with $5.25 billion, is in "harvesting" mode, according to the firm's website. That is the fund that invested in YES.
Goldman features its involvement in YES on its website, in a promotional section entitled "Progress Is Everyone's Business." An accompanying video includes Richard Friedman, head of merchant banking at Goldman and a member of its management committee, Mr. Cardinale, and David Castelblanco, a managing director.
Goldman is under pressure to sell off stakes of its hedge-fund and private-equity investments to comply with new regulations under the Volcker rule, which limits bank trading and investing activities. Earlier this year it began selling down its hedge-fund stakes and said it would limit investments in new funds to 3%.
Write to Liz Moyer at firstname.lastname@example.org.
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