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- Mar 19, 2019
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The article in the Los Angeles Times regarding the sudden and unexpected dysfunction within Chargers ownership makes a claim that has gained significant traction. That claim, however, is not factually accurate.
The claim is this: Dean Spanos has promised to hire an investment banker after the 2024 season to find a buyer for the team. This contention has been characterized as a broader intention to sell the team.
First, the trust at the center of the litigation holds only 36 percent of the franchise. The remaining 64 percent has no direct connection to the lawsuit. (There’s an important indirect connection, however. Keep reading and it will eventually make sense.)
The commitment to hire an investment banker relates to the identification of potential opportunities for the various members of the Spanos family sell their shares (nine percent each for four siblings) held in trust. A decision by any member of the Spanos family to sell the portion held in trust would be subject to a right of first refusal, and it would give the remaining family members the ability to buy out the others at the price offered by a prospective external buyer.
As a source with knowledge of the situation explained it to PFT, Dea Spanos Berberian has wanted to sell her share of the team since its relocation to L.A. The 2019 letter in which Dean Spanos refers to the future hiring of an investment banker flows directly from Dea Spanos Berberian’s desire to sell. The letter does not contain any agreement that the team will be sold.
Here’s the key language from the letter, which was attached as Exhibit 3 to the petition filed by Berberian: “Although there can be no assurance that a sale will actually be consummated, no later than thirty (30) days following the conclusion of our fifth (5th) season in the new SOFI stadium, I agree, in my capacity as Manager and on behalf of the Company, to retain an investment banking firm reasonably acceptable to Dea, Michael and Alexis to market the sale of the Company, and I will cooperate in such marketing effort in order to maximize value for the benefit of all Members. I shall commence the process to interview and identify qualified investment banking firms to present to Dea, Michael and Alexis reasonably in advance of the retention and arrange for meetings among the parties as part of the engagement process. In the event that any Member wishes to sell his or her interest in the Company as a result of the above referenced process or at any other time, I hereby provide my advance consent to such transaction subject to the rules of the NFL regarding such sales and the first refusal rights referred to in E. above.”
In English, this means that Dean Spanos will retain an investment banker after 2024 to locate a potential buyer for the 36-percent of the team held in trust for the four Spanos family members. If/when one of those family members has a buyer for his or her share, the remaining family members will have a right to match that portion of offer. If they don’t, the family member who wants to sell his or her interests will be able to do so.
Of course, it’s possible that someone like Jeff Bezos will make one or more offer(s) to family members that individually can’t be refused and collectively can’t be matched. There’s still no blanket commitment to sell the 36-percent interest in the team after 2024, or at any point.
Berberian, through her lawsuit, wants to force a sale of the entire interest in the Chargers’ organization (36 percent) owned by the trust through which she and her siblings each hold nine percent of the team. She wants to do that for one very simple reason, in our view. She knows she’d get more for her nine-percent interest in the team if it’s sold as part of a 36-percent chunk than she’d get if, in the end, a buyer attempts to acquire only her nine-percent interest via the trust.
She’d get more because, coupled with the separate 15-percent interest that she and her three siblings each separately own in the team, a forced sale of the full 36-percent share held by the trust would allow an outside buyer to add that to Berberian’s 15-percent share. That’s 51-percent of the team and full control of it.
This reality makes Berberian’s 24-percent interest in the team FAR more valuable than the nine percent she can sell through the trust and the 15-percent she can sell on her own.
By forcing a sale of the 36-percent and packaging it with her 15-percent share, Dea Spanos Berberian can hand Bezos or someone else the ability to take over the team — and that’s the kind of thing that infuses far greater value into any and all available equity interests.