An investment group that was prepared to pay the Big Ten $2.4 billion for a 10 percent share of the conference’s media and sponsorship rights has put the deal on hold due to the continued public opposition from two schools, Michigan and USC.
UC Investments, which manages more than $200 billion in assets held by the California universities’ endowment and pension funds, issued a statement Monday saying it “requires some additional time to complete our due diligence” because of “recent developments.”
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Under the proposed deal, UCI would have held a 10 percent stake in a new holding company, Big Ten Enterprises, contingent on the schools extending their current Grant of Rights by 10 years, through 2046.
“We remain convinced that the unity of the 18 Big Ten university members is key to the success of Big Ten Enterprises,” said Jagdeep Singh Bachher, CIO of UC Investments.
A source briefed on the Big Ten’s internal discussions told The Athletic last week that the conference had not formally scheduled a vote by the league’s university presidents and chancellors on whether to accept the deal. The person said there was hope within the conference that a decision could be made before Thanksgiving.
The Big Ten officials were considering moving forward with the deal without Michigan and USC, and giving those schools up to two years to opt in and receive a lower rate of return depending on when they signed on.
The Big Ten declined to comment on UCI’s letter.
A person with knowledge of the discussions said UCI plans to take a break for several months due to increasing public backlash to the deal by the two known holdouts, Michigan and USC. Michigan Board of Regents chair Mark Bernstein has called the proposal akin to “a payday loan.” Another board member, Jordan Acker, has suggested Michigan could go independent when the current Grant of Rights with the Big Ten expires in 2036 rather than ink an extension.
The deal would not put the Big Ten on the hook for money that would need to be repaid and would come with upfront payouts to each of the 18 Big Ten schools that average about $130 million.
Meanwhile, in an open letter to USC fans last Friday, AD Jen Cohen said the school was still evaluating the proposal.
“We greatly value our membership in the Big Ten Conference and understand and respect the larger landscape,” Cohen said. “But we also recognize the power of the USC brand is far-reaching, deeply engaging, and incredibly valuable, and we will always fight first for what’s best for USC.”
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The deal is also getting the attention of lawmakers on Capitol Hill. Sen. Maria Cantwell (D-Wash.) sent a letter to the Joint Taxation Committee of the Senate and the House requesting clarity on the tax-exempt status of some of the financial activities going on in college sports.
“The legal and financial landscape of college sports has changed substantially over the years and it now is a multi-billion dollar industry, whose growth and potential growth have attracted the attention of private equity and venture capital investors,” her letter said.
With the blessing of the Big Ten’s university leaders seeking new revenue streams, Petitti began exploring private equity opportunities for the conference more than a year ago.
After the league spoke with major investment firms such as RedBird Capital, Blackstone and Apollo, a nontraditional investor emerged this summer: UC Investments, a non-profit public pension and arm of the UC system. In his letter, Bachher said it had entered into exclusive negotiations with the conference.
“We will work closely with the Big Ten in the coming months to allow all its members to evaluate the benefits of our potential investment in Big Ten Enterprises,” he said.