Banc of California is paying a $20.1 million fee for the right to end its stadium-naming deal with professional soccer team Los Angeles Football Club 12 years early.
The bank and Major League Soccer club on Tuesday said they were unwinding the 15-year, $100 million deal that began in 2018. By the time the agreement expires at the end of the year, Banc of California will have paid more than $35 million for the right to have its name on the venue, the company said in an SEC filing.
Collecting the termination fee, akin to three years’ worth of the current payments, will help buoy the team as it seeks another naming rights partner amid the COVID-19 pandemic, which has halted play in the major U.S. sports leagues.
“The good news with naming rights is that those companies typically look at these deals as long-term investments,” LAFC president Tom Penn said.
LAFC negotiated the original naming rights deal as the $350 million stadium project was starting construction, pitching sponsors with renderings and projected metrics.
Penn said LAFC will have the advantage this time of negotiating with a fully operational stadium, which has sold out every MLS game and which will hold events during the 2028 Summer Olympics.
The team and league are also in a different place financially. LAFC owners, a group that includes Apollo Global Management senior partner Larry Berg and Riot Games co-founder Brandon Beck, recently bought back a share of the team at a league-record $700 million valuation.
That said, because the deal was already among the richest in the league, the team may not get much more this time around.
According to sponsorship consultant Eric Smallwood, the team may get about $7 million annually, depending on what other perks are included in the deal.
“But they’ve got that $20 million the bank,” Smallwood said. “That’s essentially three years’ worth of payments already on hand.”
The original deal was costing Banc of California about $7.2 million a year, including the $6.7 million average annual payment and other annual expenses of around $500,000, according to the filing. The bank paid LAFC about $15 million over the first 27 months, the filing shows.
The bank said the buyout would result in a pre-tax cost savings of $87 million over the next 12 years.
The split, described by both sides as a mutual parting of ways, comes at a time of change for Banc of California. It has a new leadership team and a new direction — shifting towards business banking. Chief executive officer Jared Wolff, who took over in March of last year, has said reducing expenses is a priority.
Investors reacted positively to news of the split — shares in the bank jumped shortly after the announcement and closed Tuesday up more than 5 percent.
Though the company and team said Banc of California will remain LAFC’s primary banking partner, the filing says the bank has no financial obligation after the termination fee. Penn also said the team was free to negotiate new partnerships within banking and related categories like mortgages and wealth management.
Eben Novy-Williams is a reporter for Sportico, Penske Media’s new sports business platform.