News Corporation, parent company of Fox Sports, announced Tuesday that it has acquired 49 percent of the YES Network. ESPN reported the deal on Monday, citing sources who were briefed by the network's board of directors.
Final details are still being worked out, but News Corp will buy its shares from the Yankees' holding company Yankees Global Enterprises as well as the other network investors, Goldman Sachs, Providence Equity and NJ Holdings, a group led by former Brooklyn Nets owners Louis Katz and Ray Chambers.
Under the deal that the board of directors presented, which could still change as negotiations are ongoing, the Yankees would sell nine percent of its ownership in the regional sports network that broadcasts its games as well as Nets games which will reduce its share to 25 percent of YES. Goldman and Providence will reduce its share to approximately 12 percent from 32 percent, as will NJ Holdings. A couple other small partners have the remaining two percent of the regional sports network.
The network was valued at $800 million when it got off the ground in 2001, but the current deal values it at $3 billion. That means the Yankees will make $270 million by cashing out. And that's just the tip of the iceberg.
The media rights agreement is subject to Major League Baseball's approval. The investment is expected to close by the end of the calendar year.
As part of the deal on the table, the Yankees are guaranteeing that the team will remain with YES for another 20 years beyond the already agreed-to 2021 season, sources said. With current rights at $85 million a year with escalators at four percent a year and rising, the new deal will ensure that the rights fee the network pays the Yankees continues to rise. In exchange for extending the rights, there is talk that the Yankees could be paid an additional $400 million to $500 million by News Corp separate from the rights agreement itself.
While some have speculated that this hints at the Steinbrenner family selling the Yankees, it's actually a stronger indication that they won't be given the money that will generate from this transaction alone.
The deal allows Goldman, Providence and NJ Holdings to sell the rest of their shares four years from the date of the agreement. The Yankees and/or News Corp will have the right to buy those shares at a predetermined market value of $3.8 billion or the Yankees can take more money off the table and sell more of its stake in the network.
News Corp's interest in the network was first reported last week by The New York Times.