Bloomberg is reporting Disney has agreed to acquire a 33% equity stake in BAM Tech, the recent spin-out of MLB Advanced Media (“MLBAM”), the streaming technology division of Major League Baseball (“MLB”). Forbes is separately reporting the deal is tracking toward completion later this summer.
Disney is reported to be purchasing the 33% equity stake in BAM Tech for $1.16 billion, implying a valuation of $3.5 billion.
As part of the investment, Disney also gains the right to purchase an additional 33% of BAM Tech during the next four years. Should Disney exercise the option, it would become the majority owner of BAM Tech. The NHL currently holds a 7% – 10% equity position in BAM Tech based on the August 2015 partnership deal between the companies.
MLBAM is jointly owned by all 30 MLB franchises, with each holding a 1/30 ownership interest. BAM Tech comprises the technology service business of MLBAM serving third-parties (i.e. not MLB). The August 2015 spin-out of BAM Tech was intended to enable MLBAM to accelerate commercial initiatives with third parties unaffiliated with MLB.
MLBAM is already responsible for several high-profile streaming services including CBS/Turner’s March Madness Live, HBO Now, PGA Tour Live, Sony Playstation Vue, watchESPN, and the WWE Network.
At the 2016 Re/code summit, Bob Bowman, the CEO of MLBAM, said he expects revenue of $1.2 billion to $1.3 billion during 2016 (a substantial increase over 2015 revenue of $800 million). Mr. Bowman also stated a revenue split of 80 / 20 between baseball and third party revenues. Those figures suggest BAM Tech was an approximately $160 million revenue business in 2015 and is set to grow to $240 – $260 million (50+% year-over-year).
Using those revenue estimates for BAM Tech, the Disney investment values the business at an approximate revenue multiple of 14x forward-looking sales (Note: several estimates were used to arrive at that valuation figure). It is unknown whether part of this consideration accounts for the value of the option Disney received, which would allow Disney to gain majority control. All things being equal, purchasing control should come at a premium.
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