Dyal Buys Stake in Phoenix Suns, Valuing Team at $1.55 Billion

(Bloomberg) -- A new division of Dyal Capital Partners agreed to buy a minority stake in the Phoenix Suns, valuing the National Basketball Association team at $1.55 billion, as institutional investors edge into a space previously dominated by billionaires.

Dyal HomeCourt Partners is purchasing less than 5% of the team and may acquire more over time, according to people familiar with the matter who asked not to be identified discussing details of a private deal. As many as 10 existing investors are selling some of their holdings, with none unloading more than 15% of their stakes. Suns owner Robert Sarver isn't one of the sellers, the people said.

“We are excited that Dyal HomeCourt Partners has partnered with the Phoenix Suns to make its first minority investment,” J.B. Lockhart, the NBA's chief financial officer, said in a statement Tuesday. “We look forward to Dyal continuing to scale its platform with additional investments in our teams.”

The Suns are also headed to their first NBA finals in almost 30 years, facing off Tuesday against the Milwaukee Bucks.

Billionaires have been a traditional and high-profile source of funds for major league franchises, but with valuations soaring in recent years, teams are starting to seek out even deeper pockets. Several funds have sprung up aimed at the sector, and Ares Management has invested more than $1 billion in sports-related properties, including in teams such as Major League Baseball's San Diego Padres. Tony Ressler, the chairman and co-founder of Ares, is the principal owner of the NBA's Atlanta Hawks.

Dyal has long taken stakes in private capital firms and hedge fund managers, and is now a division of private investment firm Blue Owl Capital Inc. Dyal is raising capital from investors to expand its HomeCourt fund after striking a deal with the NBA last year to take stakes across the league's 30 teams. The Phoenix Suns transaction is the first struck by Dyal.

The transaction values the Phoenix franchise at more than four times the roughly $400 million Sarver paid when he bought the team about 17 years ago. More institutional investors will be a “tremendous benefit to the league and its owners,” Sarver said in the statement.

Michael Rees, Blue Owl's co-president, said in a telephone interview that the firm had raised an initial pool of capital to deploy imminently, “and we plan to raise more capital over the coming months.”

Dyal plans to diversify investments across NBA teams, and expects valuations to rise further due to the value of media-content rights associated with each franchise, especially as large technology firms such as Amazon.com Inc. seek to expand their offerings of live sports. The HomeCourt investors also expect online betting to add more value as it becomes legal in more states and expands internationally, according to Drew Laurino, a Dyal managing director.

“We're going to start with something like a 5% stake and look to grow it over time,” Laurino said of the Suns deal as well as the firm's plans for future acquisitions. Dyal can seek to expand its NBA holdings to as much as 20% per team, according to Laurino.

“You cannot buy an interest in the entirety of the NBA, but through HomeCourt, our goal is to create that kind of diversified exposure,” Rees said. “If you bought a piece of a team even five years ago, or 10, 15 or 17 years ago, you're sitting on a massive gain. Maybe as much as four, five, 10 times your money.”

The Blue Owl executive called the opportunity “a huge rising tide.”