No, the Denver Broncos won’t be sold to a decentralized band of crypto enthusiasts. But the team and the NFL have slightly less control over who ultimately ends up with the franchise than they normally might.
The Broncos are currently owned by the trust of late owner Pat Bowlen, and the three trustees have a fiduciary responsibility to maximize profits for Bowlen’s estate. In simple terms, the team has to be sold to the highest qualified bidder.
That’s different from the more common private sale of franchises, according to lawyers, bankers and league insiders. In a traditional sale, owners often solicit multiple bids but have the freedom to get serious with whomever they want. Price is important, but the financial history of the bidders, their intentions with the team, their relationship to the city, and the makeup of their group all factor into the final decision on a sale.
This is especially important in the NFL, which has clear preferences regarding who it allows into its exclusive 32-member club. Some of this is codified into the ownerships restrictions, and the league would still have to approve any Broncos buyer (sorry, crypto bros). Beyond that, more specific desires—one person vs. a big group, how the buyers made their money—will be harder to achieve.
“There’s a lot of outside pressure on the NFL to figure out how to [add an owner] in a way that hopefully will improve the overall look and feel of the league,” Irwin Kishner, co-chair of the sports law group at Herrick, Feinstein LLP, said in a phone interview. “But a trust is required to maximize the assets and what it’s administering to the beneficiaries. That is how, in a very rudimentary way, trust and estate law works.”
Kishner is referencing diversity, which is a priority for the league and also an area where the estate sale could complicate things. During his annual “State of the League” press conference at the Super Bowl, commissioner Roger Goodell spoke about his efforts to attract minority bidders for NFL teams. The league has held multiple meetings with Byron Allen, a black media mogul who is interested in putting together a Broncos bid group, and Goodell hinted that there were others waiting in the wings.
“We have worked hard to make sure that we have as many [minority] candidates as possible and put them in a position to succeed,” Goodell said. “So, explaining our policies, ownership rules, what we can do to make sure they are best prepared to enter into the process of acquiring a franchise and have a full understanding of what it will take to do that, both financially and from a policy standpoint.”
While a private sale could result in a more direct move towards a minority bidder, the Broncos’ hands are partially tied. If an Allen-led group bids $4 billion, and another qualified bidder offers a little bit more, the trust will likely have to choose the later party.
NFL guidelines require a control owner to hold at least 30% of a team, and the debt limit on a purchase is $1 billion. Ownership groups are limited to 25 people and cannot include investment funds, per current league bylaws. A sale requires the approval of three-quarters of NFL owners. Representatives for the NFL and Broncos declined to comment. Allen & Co., the investment bank hired to sell the team, did not return requests to comment.
Prior Transactions
There have been only two teams sold since 2013 in the NFL, where the average ownership tenure is 40 years. Ralph Wilson’s estate sold the Buffalo Bills in 2014, and Terry and Kim Pegula were the highest bidders at $1.4 billion. In 2018, Jerry Richardson sold the Carolina Panthers to David Tepper for $2.28 billion, while a group led by Ben Navarro had a similar offer. Tepper got the nod, thanks to his deep pockets, the fact that he was one person, paying cash, and concerns regarding the foundation of Navarro’s wealth, which was built in the debt-collection industry.
The 2014 sale of the NBA’s Milwaukee Bucks is an example where the highest bidder was rebuffed. Former Microsoft CEO Steve Ballmer wanted the team and reportedly offered at least $100 million more than the winning bid, but Herb Kohl wasn’t interested in selling to a Seattle-based owner and risk the Bucks relocating. A trustee would have been hard-pressed to decline Ballmer’s offer.
One month later, the Los Angeles Clippers hit the market in the wake of the Donald Sterling racism scandal. The most recent estate sale in the NBA was a highly-complex process, but the bidding was fairly straightforward. There were a handful of qualified groups, but Ballmer was the highest bid by a wide margin. He bought the team for a then league-record $2 billion.
“It was a no-brainer. Steve was $400 million ahead of the next bidder,” said Pierce O’Donnell, a lawyer who represented Shelly Sterling, the wife of Donald Sterling who was tasked with selling the team.
This is perhaps the ideal scenario for the NFL regarding the Broncos: a highly desirable, highly liquid bidder ends up with the highest offer. The worst-case scenario might be something like what happened when the Yawkey Foundation, a charitable trust, sold the Boston Red Sox, Fenway Park and 80% of NESN in 2002.
Red Sox Estate Sale
Three competing bidders emerged, and when the offer from John Henry’s group was preferred over substantially higher ones from Charles Dolan and Miles Prentice, Massachusetts attorney general Thomas Reilly got involved. He questioned if the trust and its beneficiaries were getting shortchanged.
Dolan’s brother Larry had recently purchased the Cleveland Indians, and there were concerns about them both owning clubs. The Red Sox also raised issues over the financing of Prentice’s bid.
“The team was owned by a charitable trust and governed by the applicable trust documents and Massachusetts charitable law,” Reilly said in an email. “While the highest bid was a factor, it was not the sole factor in determining whether the trustee met their fiduciary responsibilities.”
The Henry bid was sealed when an additional $30 million was directed to charity. Approving Henry’s group was critical for MLB because it had an ownership domino effect. Henry sold the Marlins to Expos owner Jeffrey Loria, and the league took control of the Expos, who were relocated to Washington, D.C. two years later to become the Washington Nationals.
Goodbye Auctions
These complexities are why leagues are shifting away from high-profile team auctions. The 2020 sale of the Utah Jazz is a good example. Billionaire Ryan Smith was a local businessman with pre-existing ties to the team through his company Qualtrics. There were a few other interested parties in the beginning, but Smith was the preference of the prior owners, and they eventually hammered out a $1.66 billion deal. (The 2017 sale of Houston Rockets to Tillman Fertitta took place under similar circumstances).
These quiet, tidy processes are not possible in an estate sale, but the league still has levers it can pull. The trust’s obligation is to the ‘highest qualified offer,’ and qualified provides a lot of wiggle room. Plus, the Broncos intend to do some financial and legal vetting of interested parties earlier than normal, according to someone familiar with the process, which could serve to narrow the funnel of eventual bidders.
“All leagues, like co-op boards in New York City, have a right to decide who becomes a member of their fraternity,” Herrick’s Kishner said, “provided there is no discrimination.”
