Magic Johnson's Dodger Deal No Slam Dunk - TheStreet



) - The $2 billion buyout of the bankrupt Los Angeles Dodgers is set to be the largest sports deals ever and will test whether big investors can squeeze profits from sports franchises by leveraging valuable media and real estate assets.

A group of investors -- headed by headed by Los Angeles Lakers Hall of Famer Magic Johnson -- bought the storied baseball franchise out of bankruptcy in a $2 billion deal announced late on Tuesday.

Barbarians are at the ticket gate of a stadium near you

Johnson and an investor consortium that includes

Guggenheim Partners

Chief Executive Mark Walter outbid hedge fund magnate Steven Cohen of

SAC Capital

and St. Louis Rams owner Stan Kroenke for the baseball team, and will also enter into a $150 million real estate venture with former owner Frank McCourt for land and parking surrounding the teams stadium.

Including debt and real estate, the deal is valued at $2.3 billion, far surpassing the $1.4 billion paid by Malcolm Glazer for U.K. soccer team Manchester United.

For McCourt, who bought the Dodgers in 2004, the sale will net a near $2 billion profit and help the real estate investor repay the bankrupt team's creditors in full, including a $150 million loan to

Major League Baseball

. McCourt will also use the proceeds to pay a $130 divorce settlement with his ex-wife Jamie, which precipitated the team's June bankruptcy filing.

Private equity giant

The Blackstone Group

(BX) - Get Report

advised the Dodgers on their sale to Johnson and Walter of Guggenheim. Losing Wall Street bidders like Cohen of SAC Capital may now set their sights on other sports teams.

Recent sales of teams like the L.A Dodgers, Detroit Pistons and Philadelphia 76'ers show that Wall Street minds are increasingly looking at sports as a good investment,

even if the bottom line outpaces wins and losses

. Prior to a late Tuesday sale announcement, the Dodgers were reported to draw interest from private equity firms like


(KKR) - Get Report


Thomas H. Lee Partners


Providence Equity Partners

, who were targeting the team's sports programming rights. That consortium, led by Leo Hindery of the

Yes Network

may have looked at creating an independent sports programming network similar to

Madison Square Garden

(MSG) - Get Report


With the Dodgers, Johnson and his co-investors will own a sports empire that includes valuable media and real estate assets. The Dodgers will need to decide on whether r to renew a new long-term carriage deal with Fox Sports or seek new partners like regional cable powerhouse

Time Warner Cable


. The group will also own valuable real estate assets, which McCourt, who bought the team for $421 million in 2004, refused to sell even as the team fell into distress.

See how the ball field is

turning into a private equity playground

for more on why financial minds are targeting sports as an investment.

For the L.A. Dodgers, Tuesday's all cash deal still needs to be approved by a judge overseeing the team's bankruptcy filing.


New York Times

reports that on Monday night, Blackstone asked for final bids from three investor groups who remained in the Dodgers sweepstakes after a multi-stage bidding process. By Tuesday, Major League Baseball approved all three bids and that night, McCourt picked the group led by local basketball legend Magic Johnson, according to the


. Others in the consortium include Stan Kasten, the former president of the Atlanta Braves and film and casino mogul Peter Gruber.

"I am thrilled to be part of the historic Dodger franchise and intend to build on the fantastic foundation laid by Frank McCourt as we drive the Dodgers back to the front page of the sports section in our wonderful community of Los Angeles," said Johnson in a statement.

"This transaction underscores the Debtors' objective to maximize the value of their estate and to emerge from Chapter 11 under a successful Plan of Reorganization, under which all creditors are paid in full," the Dodgers said in a release.

As the Dodgers gear up for Opening Day on April 4 and the 50th anniversary of the franchise since it left Brooklyn later in the month, watch to see if Magic Johnson can wrench out a profit from the Southern California sports empire for another read on how financial minds are entering the ballgame.

As baseball teams gear up for the first pitch to the season, watch to see whether other deals will be cut in 2012. Losing Dodger bidder Steven A. Cohen now may focus his sights on the New York Mets. Earlier in 2012, Cohen bought a $20 million stake in the Mets, whose owners recently

settled a Bernard Madoff related lawsuit for $162 million



Written by Antoine Gara in New York