Research & Analysis: The Liberty Braves Group (BATR) High-Growth Monopoly @ 50% Discount to NAV

92%-110%
Expected 12-month Return

High-Growth Monopoly @ ~50% Discount to NAV

The Liberty Braves Group (BATRK)

- Braves Group owns two key and misvalued assets:
o the Atlanta Braves (baseball-related revenues from MLB team and stadium)
o the Battery Atlanta (mixed-use facility adjacent to the stadium)
- The primary reason that investors have drastically undervalued BATR is that
managements own NAV projection is unrealistically conservative and misleading:
o Below market multiple on team revenues
o Valuation inappropriately based on trough of team performance cycle

Positioning: Long BATRK

Type: Deep-Value Equity w/Catalyst
Investment Horizon: 1 Year

o Zero return on equity attributed to Battery Atlanta

- Many analysts and investors have accepted managements valuation as within the range of
fair value, likely because there are few comparable entities and the unusual nature of valuing
a tax-shielding business based on the performance and popularity of a sports team. Also, the
true economic value of the stadium and mixed-use facility has yet to be observed.

Context: Unique tax shield assets coupled

with undervalued real estate

- Managements conservativism is understood and its certainly better to miss low than high.
However, accepting managements NAV projection is akin to valuing a media monopoly
and all of its intangible assets at 1x book value wholly unrealistic.

Mispricing
Opportunity: Economic
potential of ballpark and mixed-use facility
under-projected by management

- Many investors will miss this opportunity because they think a private buyout is years down
the road. Even if this is true, they are missing a huge piece of the puzzle: with the new
SunTrust Stadium and new Battery Atlanta mixed-use facility completing construction in Q1
2017, FY2017 will see a dramatic increase in revenues not captured by managements
projections. For a business that is valued on a multiple of revenues (as professional sports
teams are), this is a strong catalyst for share appreciation throughout the 2017 fiscal year and
baseball season.

Catalyst: Facilities open in Q1 2017,

revenue recognition will drive share
appreciation
Entry Price: $20.46
Downside Scenario: Worse-than-expected
adoption of ballpark and mixed-use,
37.68/sh, +92% return
Base Scenario: Conservative ballpark and
mixed-use
expectations
achieved,
$41.20/sh, +110% return
Margin of Safety: Trades at 46% discount
to worst-case-scenario NAV

- Although this trade does not rely upon on-field performance, there is large potential upside
in that everyones projections of 2017 revenue are based upon 2015/2016 revenue two of
the worst seasons in Braves history. 2014-2016 were intentionally rebuilding years for the
Braves team (losing records top draft picks and player trades) so that the team can best
capitalize on revenue opportunities with the new stadium in 2017 by timing the acquisition
of player talent.
- An additional bonus could come in the form of a private buyout, for which there are many
tax, social, and political incentives. Primarily, a wealthy buyer can use 90% of the purchase
price of the club for depreciation expense for up to 15 years. Uniquely, this depreciation can
be applied to the individuals other unrelated business interests. A buyout is not rumored or
expected, but could provide surprise upside while there are few factors that could create
surprise downside.

December 14th, 2016

Research & Analysis: The Liberty Braves Group (BATR) High-Growth Monopoly @ 50% Discount to NAV

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Table of Contents

Investment Analysis
Company Overview
Introduction to Professional Sports Valuation
Forbes Valuation Considerations
Valuing a Sustainable Monopoly
National and Local Broadcasting Contracts
MLB Advanced Media and BAM Tech
Precedent Transactions
Impact of SunTrust Park Opening
The Battery Atlanta

4
5
6
7
8
9
10
11
12

Trade
Valuation
Mispricing Opportunity
Catalysts
Risk Identification

14
15
15
15

Performance
Timing, Asymmetry, and Liquidity
Projected Return
Recent Stock Performance

18
18
18

December 14th, 2016

Research & Analysis: The Liberty Braves Group (BATR) High-Growth Monopoly @ 50% Discount to NAV

Investment Analysis

December 14th, 2016

Research & Analysis: The Liberty Braves Group (BATR) High-Growth Monopoly @ 50% Discount to NAV

Company Overview
Liberty Media Corporation bought the Atlanta Braves in 2007 for ~$458 million
(exchanged Time Warner Inc. shares). Liberty, founded and chaired by John
Malone, has a strong multi-decade history of acquiring large media assets and
generating mid-to-high double digit IRRs.
On April 15th 2016, Liberty created three tracking stocks for its largest assets:
Liberty Media, SiriusXM, and Braves Group. Liberty has a history of creating
tracking stocks for individual businesses to allow investors to isolate the valuation
of each component of its media portfolio.

Company
Parent Company
Ticker
Headquarters
Primary Industry
Sub-Industries
Market Cap
Enterprise Value

The Liberty Braves Group

Liberty Media Corporation
BATRA / BATRK
Atlanta, GA
Media
Entertainment, Broadcasting
$985.8 million
$933.8 million

2015A Revenue
2016E Revenue
2017E Revenue

$266 million
$272 million
$348 million

Due to the nature of irregular earnings and cash flows, as well as the complication
of tax shield valuation, professional sports clubs are valued using revenue multiples.
Therefore, most of the analysis of the actual MLB team will focus on its revenue
generation.

EV / 2016E Revenue
EV / 2017E Revenue

3.43x
2.68x

5Y Rev CAGR

5.8%

After a division-winning year in 2013 ($260m revenue), the Braves held the worst
record in the league for most of 2014, 2015, and 2016. As a result, game attendance
fell 19% (to its lowest level since 1990) and revenues fell 3.8% to $250m in 2014,
and rose to $266m in 2015.

Shortly after issuance of the tracking stock, the trading price of BATR fell due to
forced selling from original holders of Liberty Media Corp. Since then, the share
price has risen from a low of $15 to approximately $20 today. This trading price is
no longer plagued by forced selling, but it is clear that a market cap of just under $1
billion drastically undervalues the Braves assets.

Management has explicitly stated that they intend to prudently spend on acquiring
top player talent only when there are attractive revenue opportunities to justify it.
The deal to construct SunTrust Park was signed in 2013, so management planned
for 2014-2016 to be rebuilding years (losing records top draft picks and player
trading) and for a strong winning team to be built for 2017 and beyond in the new
stadium (>25% boost to revenue).
Investment in BATR is low-risk because of the trade creation price at under 50% of
NAV, but also because of the regional monopoly the Braves hold. MLB has grown
revenues every single year on record, excluding years of player strikes in the 80s and
90s.

BATRK
Greg Maffei, Liberty Media CEO

December 14th, 2016

Research & Analysis: The Liberty Braves Group (BATR) High-Growth Monopoly @ 50% Discount to NAV

Introduction to Professional Sport Valuation

The Big 4 US professional sports leagues (NFL / MLB / NBA / NHL) and their 123 constituent teams compose a very unique asset class within
the entertainment industry. Although the combined estimated enterprise value of these entities is over $235 billion (roughly the size of Proctor
& Gamble), there is virtually no coverage of this sub-industry by analysts or investors. The obvious reason is that nearly all but three of them are
privately-owned. However, there are several completely unique characteristics that make US sports teams virtually incomparable to traditional
companies (or even to international sports teams).
Tax Shielding
The most important economic characteristic of a major league sports team is its ability to create a tax shield for its owner. The IRS allows
for 90% of a teams purchase price to be depreciated. The depreciation can follow any schedule of the owners choosing, as long as it is
utilized within 15 years. The depreciation expense can even be applied against earnings from the owners unrelated business interests.
Assuming a marginal 35% tax rate, a $2 billion purchase would immediately create $700 million in tax shield. If applied evenly over 15
years, this creates a guaranteed 2.3% yield without any franchise growth or profit. In other words, the tax benefits reduce the effective
purchase price of a club by 35%.

True Monopoly
Each league is a true national monopoly and each team a true regional monopoly. Unlike established blue chip stocks, once-believed to have
large economic moats (AOL, Dell, General Motors), these leagues never see their aggregate worth decline, even throughout the 2008-2009
recession. Individual teams may lose value in the short-term if they perform poorly, but these gyrations are small due to balancing
mechanisms that lift all teams higher year after year.

Adaptable, but Never Displaceable

Most established sources and channels of entertainment are easily displaced by new technology. One of todays most plaguing examples of
this is the cord-cutting phenomenon among millennials. Interestingly, professional sports have continued to adopt new technologies and
resist displacement. While overall viewership has transitioned from traditional television to streaming services like Netflix, sports television
broadcasting has continued to grow steadily (due to the urgency of live viewership). Additionally, sports viewing easily molds into the new
viewing media created by technology: online streaming, mobile apps, etc.

Trophy Asset
The intangible benefits of owning a sports team likely needs no description. For one, there is a large supply of billionaires who love their
sport of choice and enjoy the team ownership experience. Individual and family owners get tremendous publicity and recognition for owning
a well-known sports team, as well as enhanced connections that could benefit their other business ventures (ex. Mark Cuban & Shark Tank).
The trophy asset phenomenon is widely believed to be the primary driver of such high valuations, but this mistakenly discounts the very
tangible after-tax return.

Structurally Limited Supply

With each of the Big 4 leagues virtually at capacity, there are a lot of tax-averse billionaires chasing however few teams may be available
for sale at a given time.

These factors make valuation an entirely different exercise than for any other kind of business. As a result, the two publicly traded US professional
sports team operators (Liberty Braves and Madison Square Garden) are underfollowed and misunderstood (particularly Liberty Braves).

December 14th, 2016

Research & Analysis: The Liberty Braves Group (BATR) High-Growth Monopoly @ 50% Discount to NAV

2016
Rank Team
1
2
3
4
-
5
6
7

Forbes Valuation Considerations

Forbes
Value Revenue

EV / Rev
Multiple

6.59

5.71
TIER 1
5.78

5.50
5.8 avg.
- multiple
6.47
5.27
5.33

4.29

4.44

4.70

4.45

4.43 TIER 2
4.42

4.29 4.3 avg.
4.07 multiple

New York Yankees

Los Angeles Dodgers
Boston Red Sox
San Francisco Giants
2017 Atlanta Braves*
Chicago Cubs
New York Mets
St Louis Cardinals

3,400
2,500
2,300
2,250
-
2,200
1,650
1,600

516
438
398
409
348
340
313
300

8 Los Angeles Angels

9 Washington Nationals
10 Philadelphia Phillies

1,340
1,300
1,235

312
293
263

11
12
13
14
15
16
17
18

1,225
1,200
1,175
1,150
1,100
1,050
1,000
975

275
271
266
268
270
240
239
244

19 Arizona Diamondbacks

925

223

4.15

20
21
22
23
24
25
26
27
28
29
30

910
905
900
890
875
865
860
800
725
675
650

240
237
241
244
234
273
227
220
208
199
193

3.79

3.82

3.73
TIER 3
3.65

3.74 3.6 avg.
3.17 multiple
3.79
3.64
3.49
3.39
3.37

Texas Rangers
Seattle Mariners
2016 Atlanta Braves
Detroit Tigers
Houston Astros
Chicago White Sox
Baltimore Orioles
Pittsburgh Pirates
Minnesota Twins
Cincinnati Reds
Toronto Blue Jays
San Diego Padres
Milwaukee Brewers
Kansas City Royals
Colorado Rockies
Cleveland Indians
Oakland Athletics
Miami Marlins
Tampa Bay Rays

4.38
4.18
4.00

*Does not include Battery Atlanta revenue, does not assume on-field improvement

Forbes has been publishing professional sports team values

since 1997 and their estimates are frequently cited by industry
participants. The Forbes contributors have primarily sportsoriented backgrounds, so their financial insights should be
taken with a grain of salt. The most prominent manifestation
of their valuation shortcoming is that they are primarily
backward-looking. Their 2016 valuations use EV multiples of
2015 revenues and they adjust multiples only after new
transactions have occurred. As a result, private market
transactions occur at a 38% premium to Forbes value on
average. In an industry in which league revenues consistently
grow at 6% annually, being backward-looking while buyers
are forward-looking can have a huge effect.
Another complication for Forbes and for anyone who attempts
to assign a fair value to a US sports team is perspective. Much
like how the pricing of municipal bonds is only attractive to
taxable investors, these sports teams are significantly more
valuable to new buyers than to long-term holders. For
example, the going-concern value of the Chicago White Sox
doesnt include any tax shield as Jerry Reinsdorf has owned
the team since 1981. Forbes lists its current value at $1.05
billion. If Reinsdorf was to suddenly sell the Sox to a buyer
who viewed the teams value on par with Forbes, the buyer
would be willing to pay up to $1.615 billion to take advantage
of the $565 million tax shield and net $1.05 billion for the
underlying team economics. That price is 53.8% higher than
Forbes, so after making a present value adjustment for the tax
shield, a 38% premium to Forbes starts to make a lot of sense
from a buying perspective.
The variation above and below the average 38% premium
reflects Forbes inability to capture unique situations within
each individual valuation. For example, Forbes makes no
adjustment for the fact that the Braves will be generating at
least 21% more revenue in 2017 due to the new stadium and
mixed-use facility. This is an easy adjustment, but there are
more difficult ones that deal with stadium purchase options,
micro-market dynamics, and un-publicized sponsorship deals.

In the case of the Atlanta Braves, it isnt a trophy asset, not even for John Malone. Its purely a strategic play that will ultimately result in a sale to a
private buyer. This is contrasted with the NY Knicks and NY Rangers, both owned by The Madison Square Garden Company (MSG). MSG is now fully
controlled by James Dolan who certainly considers the famous New York teams and venues to be his trophy assets. Besides Dolans image of being one
of the worst capital allocators in professional sports, MSG should suffer from being valued on a going-forward basis instead of as an asset for sale.
However, due to the markets lack of appreciation for the difference in objective, the Braves are actually trading at a discount to MSG (Braves: 2.2x
2017E revenue, MSG: 2.4x 2017E revenue) [after extracting mixed-use facility from revenue and EV]. Part of this mispricing is attributable to the lack
of understanding around 2017s impending revenue increase, the other part reflects the misunderstanding of Libertys strategic objective. MSGs stated
objective in their 10-K is to own teams that consistently compete for championships while Liberty Media has a long history of purchasing media and
entertainment businesses and selling them 7-15 years down the road.

December 14th, 2016

Research & Analysis: The Liberty Braves Group (BATR) High-Growth Monopoly @ 50% Discount to NAV

Valuing a Sustainable Monopoly

Many observers balk at the prices paid in some of the recent team purchases. This would be a very justified assumption using traditional
valuation metrics, even after accounting for the tax shield. However, even well-established blue chip companies with large economic moats
cannot claim the permanence that professional sports can. 2017 will mark the Braves 141st season and their 51st in Atlanta. Needless to say,
the Braves nor the MLB are going anywhere. Public equity investors arent used to approaching true and sustainable monopolies. Even in
current examples of publicly-traded monopolies, most of them are susceptible to their entry barriers being destroyed by regulation or new
competition. Singular, unified professional sports leagues are a common societal good in the US, immune from regulation or the threat of
competing leagues. While European soccer leagues are threatened by talent poaching from neighboring leagues, the US and Canada are
geographically isolated. Additionally, the Big 4 US sports are American sports while foreign nations focus on soccer. So far, there has
been no evidence of one league cannibalizing anothers revenues. The leagues are likely complimentary in that supporting the Atlanta Falcons
makes you more likely to also support the Atlanta Braves. While each league faces their own challenges (NFL: concussions and player
safety, NBA: racial and cultural controversies, MLB: relevance with African-Americans, NHL: limited appeal outside of hockey regions),
leagues have traditionally adapted their rules to improve their appeal (increasing pace of play, instating safety rules, enforcing dress and
behavior codes, etc.)

Aggregate League Revenues

12,000
10,000
8,000
6,000
4,000
2,000
0

MLB

NFL

In the 50 years since the MLBs first national

television broadcasting contract with NBC in
1966, there have only been three years of decline
in aggregate league broadcasting revenues. All
three were labor strike years, the last of which was
in 1995. MLB broadcasting revenues have
increased steadily by 11.7% annually since 1966.
Since 2001, the MLB, NFL, and NBA have had
no down years in aggregate revenue, except one
during the 2011 NBA lockout. Absent a player
lockout, there is nothing that has stopped US
professional sports revenues from climbing year
after year, not even the global financial crisis,
during which all three leagues grew their revenue.

NBA

December 14th, 2016

Research & Analysis: The Liberty Braves Group (BATR) High-Growth Monopoly @ 50% Discount to NAV

National and Local Broadcasting Contracts

Unlike the NFL and NBA, an outsized share of team broadcasting revenue is from local networks (RSNs).
Just before selling the Braves to Liberty Media in 2007, Turner Broadcasting signed a 20-year deal to grant airing rights to Braves TBS
Baseball (owned by Turner) at a below-market value. This was highly self-serving but also something that Liberty was aware of at the time
of purchase. While its expiry in 2027 is not for another decade, Liberty did have the chance to renegotiate parts of it in 2012, a deal they now
consider to be in the upper half of league deals. While better, this is still unacceptable for a team that will soon be in Tier 1 on a revenue basis.
When Liberty does sell the Braves, they will point to the 2027 local broadcasting contract renewal as a cause for a premium EV / revenue
multiple to be paid.
On a national level, the MLB agreed to an 8-year deal in 2012, effective 2014-2021. The $12.4 billion deal includes annual contributions of
$700m, $500m, and $350m from ESPN (Disney), Fox, and Turner Broadcasting, respectively ($1.55 billion annual total, $51.67 million per
team). Similar to the 2027 local broadcasting expiration, the 2021 expiration of the national broadcasting deal creates a future catalyst for
increased revenue and valuation.
Liberty Media is acutely suited to manage the Braves, having bargained for MLB broadcasting deals since its founding in the early 90s. Liberty
also has a long history of working with Fox and Turner, the leagues current national broadcasters: Liberty has formed joint ventures with Fox
to air MLB games and Liberty has partnered with Turner on non-baseball content. The Braves themselves also have extensive history with
Turner, having been owned by the broadcasting group since 1976 and sporting the Turner name on their ballpark. Braves CEO Terry McGuirk
was CEO of Turner Broadcasting from 1996-2001 and currently serves as vice chairman. Liberty is arguably better positioned to financially
manage an MLB team than most other owners who may have backgrounds in unrelated fields or are more concerned with personal interests.

Team Local and

National
2016
Broadcasting
National
Revenues, $USD
Revenue
Los Angeles Dodgers
52
Los Angeles Angels
52
New York Yankees
52
Boston Red Sox
52
Seattle Mariners
52
Chicago Cubs
52
Houston Astros
52
Philadelphia Phillies
52
Texas Rangers
52
Detroit Tigers
52
San Francisco Giants
52
Chicago White Sox
52
Arizona Diamondbacks
52
New York Mets
52
Washington Nationals
52
Baltimore Orioles
52
Oakland A's
52
Cleveland Indians
52
San Diego Padres
52
Minnesota Twins
52
Atlanta Braves
52
St Louis Cardinals
52
Cincinnati Reds
52
Pittsburgh Pirates
52
Milwaukee Brewers
52
Kansas City Royals
52
Toronto Blue Jays
52
Colorado Rockies
52
Miami Marlins
52
Tampa Bay Rays
52
TOTAL
1,550

2016
Local
2016
Broadcast
Revenu Broadcastin 2015 Team
% of Team
e
g Revenue
Revenue
Revenue
204
256
438
58%
118
170
312
54%
98
150
516
29%
80
132
398
33%
76
128
271
47%
65
117
340
34%
60
112
270
41%
60
112
263
43%
56
108
275
39%
55
107
268
40%
54
106
409
26%
51
103
240
43%
50
102
223
46%
46
98
313
31%
46
98
293
33%
46
98
239
41%
41
93
208
45%
40
92
220
42%
39
91
244
37%
37
89
240
37%
35
87
266
33%
33
85
300
28%
30
82
237
35%
25
77
244
32%
24
76
234
32%
22
74
273
27%
20
72
241
30%
20
72
227
32%
20
72
199
36%
20
72
193
37%
1,571
3,121
8,394
37%

December 14th, 2016

Local Deal
Length/Size
25/$8.35 B
20/$3 B
30/$5.7 B
est.
18/$1.8 B
est.
20/$1.6 B
25/$2.5 B
20/$1.6 B
10/$500 M
25/$1.75 B
est.
20/$1.5 B
25/$1.3 B
Arbitration
est.
21/$1 B
10/$400 M
20/$1 B
12/$480 M
est.
15/$1 B
est.
est.
est.
12/$240 M
est.
10/$200 M
15/$270 M
est.

Start Yr
End Yr
2014
2038
2012
2031
2013
2042
2006
2014
2031
2004
2019
2013
2032
2016
2040
2015
2034
2009
2018
2008
2032
2004
2019
2016
2035
2006
2030
2006
2028
2006
2028
2009
2029
2013
2022
2012
2031
2012
2023
2008
2027
2008, 2018 2017, 2032
2007
2016
2010
2019
2013
2019
2008
2019
2011
2006
2009

2020
2020
2018

Local
Broadcastin
g Equity
100%
25%
20%
80%
71%
20%
0%
25%
10%
0%
30%
20%
0%
65%
18%
82%
0%
0%
20%
0%
0
30%
0%
0%
0%
0%
100%
0%
0%
0%

Research & Analysis: The Liberty Braves Group (BATR) High-Growth Monopoly @ 50% Discount to NAV

MLB Advanced Media and BAM Tech

MLBAM Overview
Forbes calls Major League Baseball Advanced Media the Biggest Media Company Youve Never Heard Of. MLBAM was formed in
2000 as a JV between the 30 MLB owners to consolidate online rights and ticket sales. MLBAM operates all of the internet and interactive
operations of the MLB and many other sport media outlets. During the 2000s, MLBAM bought Tickets.com and signed deals with StubHub,
Yahoo, and Sports Illustrated.
MLBAM created superior backend infrastructure and now supports not only MLB and Minor League Baseball, but also many large regional
baseball broadcasters, WWE Network, WatchESPN, ESPN3, HBO Now, PGA Tour Live, NHL Network, and European coverage of the
Olympic Games.

Mobile Technology
MLB At Bat has been the worlds top-grossing sports app for eight years consecutively, downloaded more than 11 million times annually.
At $19.99/year for premium features, fans receive live broadcasts, highlights, and a dense array of interactive information including
schedules, rosters, and stats.
MLB At the Ballpark has used Apples iBeacon technology to transform how fans experience live games. iBeacon uses geofencing
technology to track fans and send relevant messages and offers to their iPhones based on their location at a ballpark. Fans receive coupons
for concessions and offers for apparel and merchandise at optimal times when they near certain areas in the stadium. This has the dual effect
of driving revenue per fan while also making fans more engaged with timely and customizable team information and video highlights.
MLB At Bat and MLB At the Ballpark are excellent examples of how professional sports leagues adopt all applicable new technologies to
improve their business instead of being displaced by them.

BAM Tech
In August 2015, MLBAM approved the spin-off of its streaming technology division (BAM Tech) as an independent company (excluding
MLB-specific properties).
In August 2016, ESPN (Disney) purchased a 1/3 stake in BAM Tech for $1 billion with the option to purchase a majority share. ESPNs
intention is to develop an over-the-top subscription streaming service. At this stage, the service would not include any current ESPN channel
or its content, but tap into rights held by BAM Tech, MLB and NHL, and additional ESPN-held college rights.
Another 10% of BAM Tech is granted to the NHL in exchange for a $600 million deal for MLBAM to manage the leagues digital properties
for six years. The remaining 57% of BAM Tech is worth ~$1.71 billion per the ESPN transaction ($57 million per team).

Valuation
MLBAM reportedly generated $620 million in revenue in 2012. Total valuation including BAM Tech is estimated at $6.75 billion by
Evercore ISI ($225 million per team). Little financial data is publicly available for MLBAM, so this could potentially contribute to difficulty
in valuing BATR.

December 14th, 2016

Research & Analysis: The Liberty Braves Group (BATR) High-Growth Monopoly @ 50% Discount to NAV

Precedent Transactions

Team

League

Year

Sale Value ($m)

Revenue Multiple

Premium to Forbes

Tier

Seattle Mariners

MLB

2016

1,400

5.2

17%

San Diego Padres

MLB

2012

600

3.2

48%

Los Angeles Dodgers

MLB

2012

2,000

4.6

43%

MLB Average

1,400

4.3

36%

Atlanta Hawks

NBA

2015

730

5.1

72%

Buffalo Bills

NFL

2014

1,440

4.86

54%

Milwaukee Bucks

NBA

2014

550

5.0

36%

LA Clippers

NBA

2014

2,000

13.7

248%

Sacramento Kings

NBA

2013

534

4.6

78%

Jacksonville Jaguars

NFL

2012

770

3.0

-8%

Cleveland Browns

NFL

2012

987

3.7

-2%

NBA/NFL Average (excl. Clippers)

835

5.7

38%

Overall Average (excl. Clippers)

1,001

4.4

38%

Everyone trying to value the Braves looks at the Forbes estimate and at revenue multiples of recent transactions. Even Liberty Braves management
cited the Forbes valuation in their April 2016 presentation. By their November 2016 presentation, they began to show revenue multiples for recent
transactions. The Forbes valuations, as discussed earlier, notoriously underestimate actual market transactions due to their backward-looking
approach. Since 2012, the noted exceptions to these rules were the Jaguars and Browns, who were (and are) the lowest of the Tier 3 NFL teams.
However, looking at simple averages doesnt tell a completely accurate picture. Liberty Braves uses the simple average of MLB and NBA revenue
multiples since 2012 to apply to their own NAV (4.5x). The primary flaw with this method is that each league is tiered into three distinct
groups of teams with their own multiple ranges: high-revenue teams that continuously drive attendance and viewership, mid-revenue teams
with cyclical popularity, and low-revenue teams that have been consistently unpopular for years. Each tier has its own revenue multiple range that
is the ultimate determinant of real-world transaction pricing.
MLB Team Tiers
Tier
# Teams
1st
Top 7
2nd
Middle 12
3rd
Bottom 11

Avg. Revenue
$390 million
$260 million
$230 million

Avg. Forbs EV
$2.3 billion
$1.1 billion
$820 million

Avg. Forbes Multiple

5.8x
4.3x
3.6x

Implied Private Multiple

7.9x
5.8x
4.9x

The Braves are currently Tier 2 but have historically been a Tier 1 team. Without any on-field performance improvement, the new stadium
construction will boost 2017 revenues well into Tier 1 range again (even using conservative estimates). This has the double-effect of improving
valuation by increasing the revenue basis while also creating multiple expansion. The lowest Tier 1 revenue multiple is the Mets at 5.3x,
according to Forbes. Applying an average Forbes premium of 36% yields an actual private market value multiple of 7.2x. The last time a Tier 1
baseball team was sold was the Dodgers in 2012, before a 30% increase in private market multiples. If the same Dodgers transaction were to occur
in 2017, it would be for 6-7x revenue or more. Therefore, to value the Braves, a soon-to-be Tier 1 team, a 4.5x multiple would be irresponsible. Of
the 10 most recent transactions in NBA/MLB/NFL, six are Tier 3, one Tier 1 is excluded from averages, and the only other Tier 1 occurred 5 years
ago before a 30% multiple expansion. This average produces misleading results that analysts, investors, and management use, then everyone is
surprised when the Clippers sell for 13.7x. If the Braves are sold after penetrating Tier 1, it will certainly be for 6x or greater. However, using 5x
for valuation purposes ensures the highest degree of conservativism.

December 14th, 2016

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Research & Analysis: The Liberty Braves Group (BATR) High-Growth Monopoly @ 50% Discount to NAV

Impact of SunTrust Park Opening

Recent MLB Stadium Rebuilds

Marlins Park
Target Field
Citi Field
Yankee Stadium
Nationals Park

Team
Year
Cost
Yr 1 Uplift
Marlins
2012
515
32%
Twins
2010
435
31%
Mets
2009
688
3%
Yankees
2009
1100
18%
Nationals
2008
611
20%

Average

21%

After generating revenue of $272 million in 2016, the Braves will begin their 2017-2018 season in a newly constructed ballpark, SunTrust
Park. There is a strong precedent for revenue uplift immediately after a new stadium construction. Within MLB, the last five reconstructions
created revenue uplift of 3-32%, averaging 21% overall.
Again, there is a problem with blindly using the simple average. The Mets uplift figure immediately stands out it doesnt make sense that
NYM would spend $688 million on stadium construction to see such paltry changes in revenue. The backstory is that 2008 was a good year
for the Mets (89-73; 3 games back from division win and 1 game back from wild card), but the Mets followed that on with the worst record
in baseball in 2009 (70-92) and many key player injuries. To make matters worse from an attendance perspective, the Yankees had a
championship season and likely cannibalized many of the would-be Mets attendees. Excluding the Mets, the MLB average is 25% with a
range of 18% - 32%. By comparison, NFL/NHL uplifts have ranged from 21% - 58%, averaging 28%.
This begs the questions for the Braves: what if 2017 is an equally bad year on the field as the Mets had in 2009? The problem with the YoY
change for the Mets was that it was followed on from a good year. The Braves however have been struggling to avoid holding the worst
record in baseball since 2014. Braves attendance has dropped 15% to its lowest level since 1990. From this point, the Braves could remain
as one of the worst teams and still achieve the 25% average revenue uplift.
However, there are yet further reasons to believe that SunTrust Park could put the Braves in the upper half of the revenue uplift range (25%
- 32%):

Conversion of low-cost upper level seating to high-cost premium seating (MOST IMPORTANT)

Improved fan experience (high-speed wifi, less traffic congestion, more parking, new facilities)

Relocation to heart of Braves country where ticket purchase concentration is densest

Eliminated low-cost upper level seating lowers total capacity by ~20%, thus increasing turnstile percentage and pricing power

New sponsorship contracts (Turner Field had no naming rights revenues)

Synergistic effects from Battery Atlanta

Turner Field SunTrust Park

Premium Seating

% Change

163

3800

2231%

1,386

600

-57%

19,268

17,500

-9%

Mezzanine

4,510

4,800

6%

Outfield

8,407

7,000

-17%

Upper Level

18,490

7,800

-58%

Total Seating Capacity

52,224

41,500

-21%

50

35

Suites
Other Lower Level

Premium Areas
Suites

December 14th, 2016

Extra premium seating results in average

revenue increase of $590,000 per game ($48
million per year)
Loss of upper level seating recouped by
increasing pricing and decreased operating
expense
Additional premium seating areas

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Research & Analysis: The Liberty Braves Group (BATR) High-Growth Monopoly @ 50% Discount to NAV

The Battery Atlanta

The Battery Atlanta is the mixed-use development that Liberty is constructing around SunTrust Park to enhance fan experience. It will
feature Comcast Tower (250,000 square feet, 1,000 employees), which will serve as Comcasts southwest headquarters. Comcast has
planned for SunTrust Park and the Battery to serve as a demonstration of the companys capabilities, sending ultra-high-speed wifi
throughout the stadium and mixed-use development.
The multi-year technology and real estate partnership will deliver multi-terabit network capabilities to SuntTrust Park and the
surrounding community, making it the most technologically advanced mixed-use development in the U.S. Comcast press release

It will also feature 550 upscale apartment units, 375,000 square feet of high-end retail and restaurant space, a X room Omni Hotel, and
several live entertainment venues.
Liberty invested $558 million ($200m net of debt) into the project and values it at cost in its own NAV. While average rental rates are
available for the Northwest Atlanta sub-market, this property is expected to greatly drive up average rates by commercial real estate analysts.
This makes ascertaining an exact value difficult. For the sake of conservativism, assigning a value at a small premium to cost is warranted.
It is also reasonable to assume that Liberty plans for the Battery to meet their target group return hurdle of mid-to-upper teens. Liberty has
specifically stated that their conservative projection for the Battery is a double-digit return as a combined entity. If we apply a 10% IRR to
the $558m investment and a conservative 8% cap rate, total value for the Battery is $698m ($340m net of debt). This contrasts with
managements at-cost representation of $558m ($200m net of debt).

Total Capital Investment

$558

Total Capital Investment

$558

(Less) Project-Level Debt

($358)

Conservative IRR

10%

Net Equity Investment

$200

Steady-State FCF

$55.8

Conservative Cap Rate

8%

Project Value

$698

(Less) Project-Level Debt

($358)

Battery Atlanta Equity Value

$340

Sq. Ft. (k)

Units

Liberty Ownership

Office (Comcast Tower)

250

1,000 employees

100%

Hotel (Omni Hotel)

250

260 rooms (4-star)

50%

Retail & Restaurant

375

8 new concepts

85%

Multi-Family

500

550 upscale apartments

85%

Entertainment (Roxy Theatre)

133

75 events per year

100%

December 14th, 2016

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Research & Analysis: The Liberty Braves Group (BATR) High-Growth Monopoly @ 50% Discount to NAV

Trade

December 14th, 2016

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Research & Analysis: The Liberty Braves Group (BATR) High-Growth Monopoly @ 50% Discount to NAV

Valuation

NAV = Atlanta Braves + Battery Atlanta

(assumes SunTrust Sponsorship value
nets out against $722m of stadium
funding)

Braves valuation based on conservative
revenue uplift from new stadium and a
5x revenue multiple (below market for
Tier 1 MLB team)

Battery Atlanta valuation based on

conservative 10-12% IRR
Potential for additional upside:
o Improved on-field performance
o Greater revenue uplift than
expected
o Realization of true Tier 1 MLB
multiple (6-7x)
o Mid-to-high Battery IRR (in line with
Liberty Group return hurdle)

Downside protection
o Regional monopoly
o Worst-in-league record can only
improve from current levels
o 6-7% annual growth throughout all
stages of business cycle

December 14th, 2016

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Research & Analysis: The Liberty Braves Group (BATR) High-Growth Monopoly @ 50% Discount to NAV

Mispricing Opportunity

General Lack of Coverage and Poor Understanding of Professional Sports Team Valuation

Management Under-Projecting Stadium Revenue Lift and Mixed-Use Value

Investors and Analysts Implicitly Using Forbes Valuation as an Anchor

Forbes valuation is backward looking, consistently underprices private market transactions,
and doesnt factor in future developments (new stadium, mixed-use development, etc.)

Catalysts
-

2017 Uplift Realized (Hard, 12 months)

Mixed-Use Revenue Realization (Hard, 12 Months)

Private Buyout (Speculative, 2-5 Years)

Improved On-Field Performance (Soft, Speculative)

Nearing of 2021 and 2027 Broadcasting Renewals (Hard, 5-10 Years)

Risk Identification
-

Player strike
Recently agreed upon CBA guarantees no labor disruptions through 2021 and there have been no labor disruptions since 1995.

Lower-than-expected adoption of new ballpark and mixed-use facility

Trade creation price is below existing value of franchise, so no revenue growth is truly priced in.

Change to treatment of professional sport depreciation in tax code

No such change is on the table, nor would it be rational, but this is the only realistic way the trade could lose money.

December 14th, 2016

15

Research & Analysis: The Liberty Braves Group (BATR) High-Growth Monopoly @ 50% Discount to NAV

Performance

December 14th, 2016

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Research & Analysis: The Liberty Braves Group (BATR) High-Growth Monopoly @ 50% Discount to NAV

Investment
Characteristics
Important
Disclosures

Investment Horizon

12 months

Minimal Potential for Loss

Yes, sustainable high-growth monopoly trading at a 50% discount

Asymmetric Upside

Yes, 92-110% return expectation

Liquidity

$900k average daily trading volume

Projected Return
Scenario

Projected Return

Bear Case

Worse-than-expected debut of ballpark and mixed-used

+92%

Base Case

Conservative expectations met in 2017

+110%

Upside Case

Private buyout within 2-5 years

>110%

Recent Stock Performance

Liberty Braves tracking stock issued on April 15th, 2016. Initial performance due to forced selling, followed by the beginning of
a rally leading into the 2017 season and opening of SunTrust Park and Battery Atlanta.

December 14th, 2016

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Research & Analysis: The Liberty Braves Group (BATR) High-Growth Monopoly @ 50% Discount to NAV

Important Disclosures
Unless otherwise noted, the information in this document is only as of the date hereof and is subject to change. This communication is confidential and is
intended solely for the person to whom it has been delivered. It may not be copied or distributed to the public.
Leverage, derivatives, and short positions are a material part of the strategy of the Fund. The use of leverage will likely increase the risks associated with
the strategy. The strategy may suffer significant losses on assets related to short positions. Unlike the possible loss on a security purchased long, there is no
limit on the amount of potential loss. The strategy implementation will involve the use of leverage, in that cash proceeds related to short positions will be
used to purchase additional securities; this involves special risk. The use of leverage may make any change in the strategys performance even greater and
cause increased volatility of returns.
Past performance is not indicative of future results. This document is for illustrative purposes only. There is no assurance that the Fund will continue to
achieve results comparable to those shown herein.
Information and data included in this document is subject to change based on market and other conditions. No chart, graph, or other figure provided should
be used to determine whether to make an investment in any fund. Portfolio statistics and analytics should not be construed or relied upon as a
recommendation by Mitotic Investments LLC; such statistics and analytics represent a specific point in time and should not be viewed as an indication of
future results.
ITD returns may be based on estimates calculated by Mitotic Investments LLC; performance analytics are based only on estimated returns and may not
reflect actual performance. In addition, certain indices are updated only on a periodic basis which may not be coincident with the date of this report.
Estimated performance information may change when such performance is finally determined by the Funds third-party administrator.
The US Dollar is the currency used to express performance. Returns are presented net of model management and performance-based fees and include the
reinvestment of all income. Net of fee performance was calculated using a model annual investment management fee of 2.00% on assets under management
and a model annual performance-based fee of 20.00% on returns generated greater than the loss recovery account balance (commonly referred to as a high
water mark). Certain investors that invest through a platform arrangement or through a placement agent may be charged higher management fees or frontend sales loads pursuant to the platform arrangement or placement agent agreement; actual performance results for such investors will be lower as a result
of such higher fees. As a result of the deduction of performance-based fees from the presentation, actual investor returns will vary based on the timing of
investment.
The investment return and principal value of the investment will fluctuate over time. Other performance calculation methods may produce different results.
Performance results may also vary for different periods. An investment in the Fund is speculative and involves a high degree of risk. Opportunities for
withdrawals or redemptions are restricted, so investors may not have access to capital when needed. There is no secondary market for interests in the Fund,
and none is expected to develop. An investor should not make an investment unless it is prepared to lose all or substantial portion of its investment. The
fees and expenses charged in connection with this investment may be higher than the fees and expenses of other investment alternatives and may offset
profits. There is no guarantee that the investment objective of the Fund will be achieved.
Index returns are presented because they are well-recognized measures of the broad markets rather than because there is a close relationship between the
investments contained in, and the performance of the Fund and the securities comprising these indices. Financial indicators and benchmarks assume
reinvestment of income, are unmanaged, and do not reflect the deduction of transaction costs, management fees, or other costs which would reduce returns.
Such indicators and benchmarks are included for illustrative purposes only and have material inherent limitations when used in comparison to the returns
of the Fund because they may have volatility, credit, or other material characteristics that are fundamentally different from those of the Fund. An investor
cannot invest directly in an index. Index returns have not been examined.
This document does not constitute an offer to sell, or a solicitation of an offer to buy interests in the Fund. The information contained in this document is
qualified in its entirety by reference to disclosures made in the confidential offering memorandum of the Fund. This document should be carefully reviewed
prior to making an investment decision, and prospective investors are advised to consult with their tax and financial advisors and legal counsel.
Any references to specific securities do not constitute a recommendation to buy, sell, or hold such securities. There is no assurance that securities discussed
herein will remain in the Fund or that securities sold will not be repurchased. Any investments discussed should not be deemed representative of the entire
portfolio. It should not be assumed that future investments will be profitable or will equal the performance of the securities mentioned in this presentation.
Trade examples are presented for illustrative purposes and should not be viewed as an indication of performance of the Fund or representative of all
transactions effected by the Fund.
Trade theses described in this document are based on Mitotic Investments LLCs current expectations and assumptions regarding the investments, the
economy and other future conditions and forecasts of future events, circumstances and results. As with any projection or forecast, such theses are inherently
susceptible to uncertainty and changes in circumstances. Actual results may vary materially from those expressed or implied in the trade theses.
This document and all information and data contained herein is CONFIDENTIAL and may not be distributed to any person without the consent of Mitotic
Investments LLC.

December 14th, 2016

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Research & Analysis: The Liberty Braves Group (BATR) High-Growth Monopoly @ 50% Discount to NAV

Appendix I: Public Comps and Niche Sports

U.S.-Listed/Private Professional Sports

League

Tier

Rev

Madison Square Garden (NYSE:MSG)*

MLB, NBA

1st

699

Manchester United (NYSE:MANU)

BPL (UK)

1st

Formula One (Acq. of private comp.)

NA

UFC (Acq. of private comp.)

NA

Liberty Braves (NASDAQ:BATRK)**

MLB

EV

EV / Rev

EV/ EBITDA

121

2,496

3.57

20.63

627

208

2,830

4.51

13.61

NA

1,829

479

8,045

4.40

16.80

NA

600

180

4,000

6.67

22.22

Min

3.57

13.61

Average

4.79

18.32

Max

6.67

22.22

734

2.11

10.05

127%

82%

1st

EBITDA

348

Return Potential

73

*MSG revenue and EBITDA are for MSG Sports segment only. EV conservatively reduced by $400m to eliminate value of MSG Entertainment (1x LTM revenue)
**Braves revenue and EBITDA figures are estimates of 2017 results, excluding Battery Atlanta. $200m subtracted from EV for Battery Atlanta. Projected Tier 1.

Comp Detail
Madison Square Garden MSG owns the NY Knicks and the NY Islanders who constitute most of the MSG Sports segment. The other segment, MSG
Entertainment, owns and operates top NY and Chicago venues including the Garden itself. The current issues plaguing MSG could be contributing to a
depressed valuation for its sports teams: 1) MSG Entertainment is losing money handily, causing the company to post a loss in every year since MSG
was spun off. MSG Sports would likely be more valuable if separated. 2) It is reported that, although MSG wholly owns the Garden and the land its built
on, they will be forced to relocate the stadium in 2023 (permit expiration) due to an expansion of Penn Station (potential combined cost to MSG and
NYC of $5 billion). 3) A lack of strategic direction with the sports franchises causes investors to value the teams on a going concern basis instead of an
asset-for-sale basis. Due to these reasons, the revenue multiple of 3.57 is likely understating the true value of the Knicks and Islanders and is not a good
standalone comp for the Braves.
Manchester United Man U is highly similar to the NY Yankees: a Tier 1 Barclays Premier League team with a historically top-in-league payroll and
large global fan base. While European soccer is less monopolistic than US sports, Man U controls a large moat versus competition within the UK and
abroad. However, the it is unclear the impact of tax shield on the clubs value. While the club is currently majority-owned by an American family, it is
currently structured as a corporation and there is no tax shielding provision in the UK. If a group of Americans were to buy Man U and delist the stock,
they could utilize the tax shield, but not if its a UK group or any other international tax-domiciled buyer.
Formula One / UFC - Both are fast-growing sports with loyal fan bases. However, there are no tax shield benefits from owning either (no matter the
ownership). Nor is either sport an established monopoly (although both operate in their own unique niche).

Summary
Under the assumption that the market values the Battery Atlanta at cost, the Atlanta Braves are deeply undervalued versus publicly traded peers by 48%
and versus niche sport acquisitions by 62% on a revenue multiple basis (41% and 48% on EBITDA multiple basis, respectively).
While it can be argued that the Braves should be valued at a premium to the Knicks/Islanders (and that the other three comps dont contain tax shielding
value), the average multiple still suggests substantial upside potential for the club and supports the conservative use of a 5x multiple.

December 14th, 2016

Research & Analysis: The Liberty Braves Group (BATR) High-Growth Monopoly @ 50% Discount to NAV

Appendix II: Liberty and Forbes Errors

The original write-up of the BATR trade cited precedent transactions, using data from Liberty Medias presentation to investors in November 2016. It was
later found that Liberty and Forbes made large material errors in their documentation of the three MLB acquisitions since 2012 that resulted in drastically
understated revenue multiples. These errors are creating a ~25% understatement of league-average revenue multiples and could be contributing substantially
to the mispricing of BATR shares.
Original Table (per Liberty Braves November 2016 Presentation and Forbes data)
Team

Year

Sale Value ($m)

Revenue Multiple

Premium to Forbes

Tier

Mariners

2016

1,400

5.2

17%

Padres

2012

600

3.2

48%

Dodgers

2012

2,000

4.6

43%

1,400

4.3

36%

MLB Average

Revised Table (per actual transaction and revenue data; change showed in parentheses)
Team

Year

Sale Value ($m)

Revenue Multiple

Premium to Forbes

Tier

Mariners

2016

1,469 (+69)

5.15*

16.7%

Padres

2012

800 (+200)

4.23 (+1.0)

75.0% (+27%)

Dodgers

2012

2,150 (+150)

8.78 (+4.2)

53.5% (+10%)

1,473

6.05 (+1.7)

48.4% (+12%)

MLB Average

*2016 Mariners revenue estimated at 5% growth from 2015 revenue of $271m (2016 EV / 2015 Rev = 5.42x)
**2012 Dodgers sale did not include any RSN equity, although potential buyers considered revenue bump in 2014 after expiration of existing deal with
Fox. 2012 EV / 2014 Rev = 5.33 (2014 revenue includes RSN revenue)
Explanation of Liberty / Forbes Errors
Mariners Media reports of the Mariners sale listed $1.4 billion as the teams EV (including 71% stake in ROOT Sports Northwest). However, Nintendos
actual proceeds from the 45% sale (reduced stake from 55% to 10%) were $661 million (per their official press release). Therefore, the actual EV was
$1,469 million ($661m / 45%). Although this was not an egregious mistake by either Liberty or Forbes, it still created a ~5% understatement of the sale
value and its revenue multiple.
Padres Forbes currently lists $600 million as the sale value of the Padres, whereas it was actually $800 million. Liberty cites Forbes as a source for their
data in the presentation. There is no obvious explanation for the cause of the error, as all official statements and media reports of the deal confirm $800
million. Neither Forbes nor Liberty used any footnotes to account for an adjustment, so this is likely resulting from manual error. This impacted the revenue
multiple (correct multiple is 4.23x versus Libertys 3.2x) and the premium to Forbes (correct premium is 75% versus Libertys 48%) by ~24%.
Dodgers Libertys error here was entirely excluding the Dodgers acquisition, even though it occurred more recently than the Padres acquisition. In addition
to this, Forbes has errors which created misstatements in the original write-up. Forbes lists the 2012 purchase price and revenue of the Dodgers to be $2,000
million and $438 million, respectively. The actual purchase price was $2,150 and the actual 2012 revenue $245 million. The causes of these errors are likely
that headline media reports of the Dodgers deal cite a $2.0 billion purchase price and that $438 million is actually the 2015 revenue of the Dodgers (not
2012). These errors understated the revenue multiple by nearly 50%.
Braves Liberty used a 8.9% inter-group ownership in their November 2015 presentation instead of the correct 15.5%. This error has been corrected in the
NAV and results in modestly lower price targets for bear and base case scenarios.
Summary
These errors cause a drastic misrepresentation of MLB transaction prices. Liberty Braves used a 4.5x multiple to value the Braves franchise, while BATR
currently trades at 2.11x (excl. Battery Atlanta). Given that the average revenue multiple for MLB transactions since 2012 is 6.05 (and average for NFL/NBA
transactions is 5.71), plus the Braves are poised to become a Tier 1 team (average multiple of 7.5 assuming 30% premium to Forbes), it seems overly
conservative to apply a 5.0x multiple, yet it still yields an expected return of over 100%. Even managements flawed valuation produces a 53% return
potential.

December 14th, 2016

Research & Analysis: The Liberty Braves Group (BATR) High-Growth Monopoly @ 50% Discount to NAV

Appendix III: Impact of RSN on Valuation

In the long-run, all MLB franchises have the same technical broadcasting rights, and the value of those rights is determined by the
popularity and success of the team and the size of the teams TV-viewership region. This is relatively easy to gauge, with the current
Tier 1 teams (Yankees, Dodgers, Red Sox, Giants, Cubs, Mets, and Cardinals) having some combination of on-field success and large
metro/regional populations. To that effect, the Braves rank towards the top (#1 largest geographical viewership region, #9 largest
metro population, #2 highest average winning record in last 25 years, #1 most championships in last 25 years (tied)). Barring the
2014-2016 rebuilding period and their current RSN contract (now with Fox after Turner sold it in 2006), the Braves are a historic Tier
1 team with influence on the entire southwest.
However, another important variable in current revenue generation for MLB teams is the recency and terms of the teams RSN
contract. The value of sports airing rights has risen dramatically and new contracts are worth substantially more than older ones. As
a result, new contracts can generate twice as much revenue and lead to sudden jumps in valuation. When an RSN contract nears its
end, a team can do whatever it wants with its local broadcasting rights. It can sell them exclusively to a network (usually Fox Sports
Networks, Comcast SportsNet, or Spectrum Sports (Charter/TWC)), negotiate for joint equity in a regional network (ex. Root Sports
Northwest), or start their own regional network (ex. YES Network).
The primary incentive for a team to participate in full or partial ownership of its regional sports network (RSN) is to shield revenue
from the leagues revenue sharing program. The program, instituted in 1996 and then improved in 2002, intends to improve
competition and fairness by redistributing some net revenues from large-market teams to small-market teams. Specifically, teams
must contribute 31% of net local revenues (tickets, merchandise, concession, broadcasting fees, etc.). The contributions are then
pooled and redistributed equally, thus making the top teams payers into the system and the bottom teams recipients. While traditional
broadcasting fees must be included in net revenue for sharing purposes, equity in an RSN (affiliate fees and ad revenue) is not subject
to inclusion in the sharing program. In the last 15 years, it has become increasingly common for owners to use RSN equity to shield
revenue and now 16/30 teams partially or fully own their RSN. All else equal, structuring broadcasting rights as RSN equity as
opposed to plain broadcasting fees from a network can increase the value of those revenues via less contribution to the sharing
program.
Valuation of an RSN
- While most RSN transactions do not disclose even high-level financials, Foxs purchase of 80% of YES Network for $3.4
billion serves as an actionable precedent ($4.25 billion total EV). YES is the most-watched and most-valuable RSN in the
country, carrying Yankees, Nets, and New York City FC (MLS) games. Applying a metro area population (MAP) adjustment
can create a relatively accurate valuation for any RSN (NYC MAP is 20.2m).
Impact of RSN Equity on Recent MLB Transactions
- 2012 sale of Dodgers did not include any RSN equity, although Guggenheim Partners anticipated a substantial increase in
broadcasting revenues beginning in the 2014 season (2013 RSN expiration). 2012 EV / 2014 Revenue = 5.33x. (conservative)
- 2012 sale of Padres for $800 million included a 20% stake in Fox Sports San Diego (3.1m MAP $650m total RSN value
$130m Padres ownership). After subtracting out $39m of local broadcasting revenue and using a revised EV of $670m,
the adjusted EV / revenue multiple slightly increased to 4.47x from 4.23x.
- 2016 sale of Mariners included a 71% stake in ROOT Sports Northwest (airs Mariners and Seahawks). (3.7m MAP
$786m total RSN value $558m Mariners ownership). After subtracting out $76m of local broadcasting revenue and using
a revised EV of $911m, the adjusted EV / revenue multiple decreased to 4.36x from 5.15x.
Summary
While the absence of RSN equity currently hurts the Braves valuation, the inevitable sale will be valued under the assumption that
new RSN equity will be created in 2027, as the next buyer is likely to be the one that reaps those benefits. Even though this
methodology very conservatively applied Yankees multiples to non-Yankees RSNs (and in the case of the Dodgers applied 2014
revenue to a 2012 purchase pric), the average adjusted transaction multiple of 4.9x still supports a 5x assumption for the Braves
(considering they will be valued above-market due to future RSN potential).

December 14th, 2016

Research & Analysis: The Liberty Braves Group (BATR) High-Growth Monopoly @ 50% Discount to NAV

Appendix IV: BATR Ownership Structure

The Atlanta Braves were purchased by Liberty Media from Turner Broadcasting in 2007. The ownership structure of the
Braves remained unchanged until April 18th 2016 when Liberty Media Corp. recapitalized into three tracking stocks:
Liberty Media Group (LMCA/LMCB/LMCK), Liberty SiriusXM Group (LSXMA, LSXMB, LSXMK), and Liberty
Braves Group (BATRA, BATRB, BATRK). The three tickers for each correspond to the three original series of Liberty
Media Corp shares prior to the recapitalization (LMCA/LMCB/LMCK), with each original shareholder receiving 0.1 of
a share of Liberty Braves Group. Liberty Media would also retain a 20% inter-group interest in Liberty Braves Group.
As part of the recapitalization announcement, Liberty also announced that it would later issue subscription rights to acquire
shares of Series C Liberty Braves tracking stock (BATRK) at a 20% discount to market price. Proceeds from the rights
offering would be used to repay the $165 million intergroup note (from Liberty Braves Group to Liberty Media Group,
this was part of the original funding for the Battery Atlanta). This way, Liberty didnt have to dilute its shareholders
ownership of SiriusXM or Liberty Media Group to essentially raise equity capital for the Battery Atlanta.
In May 2016, after the launch of the tracking stocks in April, Liberty announced the terms of the rights offering: 0.47
share rights would be distributed per share of Series A, B, or C at a price of $12.80 (~20% discount from average trading
price of $16.00).
The subscription offering was fully subscribed with 15.83 million shares of Series C Liberty Braves issued at $12.80 (total
proceeds of $202.67 million). $150 million of the proceeds fully repaid principal and interest remaining on the inter-group
loan and the remaining $52.67 million were attributed to Liberty Braves Group for working capital. This also reduced
Libertys inter-group interest to 15.6% (9.08m shares vs. 49.43 currently outstanding).
Current Ownership
BATRA Shares = 10,230,989 shares (17.5% of diluted)
BATRB Shares = 986,828 shares (1.7% of diluted)
BATRK Shares = 38,214,044 shares (65.3% of diluted)
Liberty Medias notional ownership of BATRK = 9,084,940 (15.5% of diluted)
Total basic shares outstanding = 49,431,861 (84.5% of diluted)
Total diluted shares outstanding = 58,516,801
Of the Braves stocks, BATRA and BATRK (Series A and C respectively) trade on the Nasdaq Global Select Market while
BATRB (Series B) trades OTC. Between Series A and C, BATRK is most liquid, with more than 3.5x the share count and
volume of BATRA.
Like Liberty SiriusXM and Liberty Media Group, Liberty Braves shares are tracking stocks, meaning that the technical
owner of the underlying assets is still Liberty Media Corp. Tracking stock shareholders have an indirect ownership right
and will ultimately receive the proceeds from dividends, spin-off, sale, or merger.
The Liberty Braves Group tracking stock tracks Braves Holdings LLC, which in turn holds Braves Basball Holdco (which
owns the baseball club and the stadium co) and BDC HoldCo (which owns proportional ownership of each Battery Atlanta
entity) (see next page).

December 14th, 2016

Research & Analysis: The Liberty Braves Group (BATR) High-Growth Monopoly @ 50% Discount to NAV

December 14th, 2016

Research & Analysis: The Liberty Braves Group (BATR) High-Growth Monopoly @ 50% Discount to NAV

Appendix V: Stadium and Sponsorship Economics

The construction of SunTrust Stadium was negotiated with Cobb County (Northwest Atlanta). The deal is highly favorable to the
Braves, with 58% of funding from tax-free municipal bonds, zero equity investment, and 100% of ballpark economics in excess of
debt servicing.
Ballpark Construction Costs($m)
Stadium construction
672
Other costs and equipment
50
Total SunTrust Park Cost
722

Ballpark Funding ($m)

Cobb County Municipal Debt
Cumberland Improvement District
Other Cobb County funding sources
Braves net funding
Total funding

368
10
14
330
722

Braves Ballpark Construction Loan

- $345m multi-draw Senior Secured Construction Term Loan (closed September 2015 at L+150-175)
- Repayment sources: naming rights, suite and club seat premiums, stadium sponsorship and signage, concessions, team rent,
parking, revenue from all non-MLB events
SunTrust Naming Rights
- SunTrust Bank
- 25 years
- $250 million total ($10m/yr average)
- 2nd largest MLB naming rights deal by average annual value
- This deal alone covers 35% of stadium construction cost (slightly less with interest)
Other Sponsorship Revenue
-

85% of year one sponsorship revenue committed under contract as of November 2016
Other sponsorship agreements with Coca-Cola, Chick-fil-A, Delta, Miller Coors, Comcast, Napa Auto Parts, Home Depot,
Infiniti (average length 10 years with 3% escalator)
Sponsorship revenue expected to completely repay $722m of municipal and Braves debt

Other Revenue
-

Additional revenue opportunities from off-season revenue streams (concerts, special events, festivals) 100% flows to Liberty
Premium seating strategy is driving new sponsorship revenue (Delta Sky 360 Club, Coors Chop House, etc.)

Other Ballpark Details

- Opening Day: April 14, 2017
- Ongoing capex: $4m annually (split 50/50 with Cobb Country subject to some limitations)
- 76% of premium seating sold via contracts of 3-15 years
- Last two ballparks built resulted in 31% year one revenue increases (Marlins 2012, Twins 2010)
- 30 year operating agreement with 5 year extension option and purchase option at 50% of fair market value
$558m Battery Atlanta Funding
-

$290m inter-group note (repaid via subscription rights offering)

$200m equity funding
$68m third party funding (from JV partners: Fuqua, Omni)

December 14th, 2016

Research & Analysis: The Liberty Braves Group (BATR) High-Growth Monopoly @ 50% Discount to NAV

Appendix
VI: Payroll
Prep for Payrolls
2017Impact
and
Beyond
on Performance,
Last 15 Years

After tying for 2nd best record in the league over the 2009-2013
period, the Braves entered a rebuilding phase from 2014-2016.
From a starting team payroll of $111 million at the beginning of
the 2014 season, the Braves reduced their player spending to $98
million in 2015 and again to $88 million in 2016 (23rd in MLB).
This resulted in decreased game attendance and flat revenues, but
ensured that the Braves would receive top draft picks and saved
the club over $36 million in payroll to deploy after the completion
of SunTrust, when the ROI would be higher.
Since the 2016 offseason began, the Braves have been signing big
player contracts in preparation for the 2017 new stadium opening.
As of today, 2017 contracted payroll is up to $124 million, a 41%
increase from 2016 and a 11% increase from the previous team
record.
While player spending cant guarantee a championship in a
particular year, it is the primary determinant of success over the
medium term. In the table to the right, the amount spent on player
talent determines a teams win record and championship
probability, with only a few exceptions. On the extreme, before
MLB instituted the revenue sharing program, the top seven payroll
teams outspent the bottom seven by 3.5-to-1. This disparity led to
zero wins by bottom-half teams in the 1995-1999 postseasons (out
of 158 games) and zero championships by teams not in the top
seven payroll ranking. While revenue sharing has created new
standards of fairness, pay-to-play still stands, and the Braves are
timing it up as they intended.
With the Braves now spending more than $124 million on talent
(11th in the league), the Braves are poised to grow on a successful
2nd half of 2016. The team will still have substantial spending room
if the right opportunities arise: the luxury tax threshold is set to
$195 million for 2017 (above which teams pay a 22.5% tax on
excess salary).

December 14th, 2016

Payroll
Rank

Win
Record
Rank

#
Champs

New York Yankees

Boston Red Sox

Los Angeles Dodgers

Los Angeles Angels

Philadelphia Phillies

Detroit Tigers

17

New York Mets

16

Chicago Cubs

15

San Francisco Giants

St. Louis Cardinals

10

Seattle Mariners

11

24

Chicago White Sox

12

11

Texas Rangers

13

10

Atlanta Braves

14

Baltimore Orioles

15

27

Toronto Blue Jays

16

12

Washington Nationals

17

18

Cincinnati Reds

18

20

Minnesota Twins

19

13

Arizona Diamondbacks

20

21

Houston Astros

21

26

Colorado Rockies

22

28

Milwaukee Brewers

23

23

Cleveland Indians

24

14

Kansas City Royals

25

30

San Diego Padres

26

25

Oakland Athletics

27

Pittsburgh Pirates

28

29

Miami Marlins

29

19

Tampa Bay Rays

30

22

Team

Research & Analysis: The Liberty Braves Group (BATR) High-Growth Monopoly @ 50% Discount to NAV

Appendix VII: Updated Valuation

Given the understatement caused by Liberty and Forbes errors, a bull case using a 6x revenue multiple has been added.
Additionally, the proportional minority ownership has been revised for the bear, base, and bull cases (although
management projection still uses 8.96% incorrectly). The new return potential range is 78% - 125%, reinforced by the
added comps and treatment of RSN equity in valuation.

December 14th, 2016

Research & Analysis: The Liberty Braves Group (BATR) High-Growth Monopoly @ 50% Discount to NAV

Appendix VIII: Europe-Listed Soccer Clubs

Internationally-Listed Soccer Clubs

League

Rev

Aresenal (OFEX:AFC)

Premier League (UK)

441

Dortmund (XTRA:BVB)

Bundesliga (Germany)

Besiktas (IBSE:BJKAS)

EBITDA

EV

EV / Rev (Adj.)

EV/ EBITDA (Adj.)

107

1,266

2.87 (4.42)

11.83 (18.20)

432

117

489

1.13 (1.74)

4.18 (6.43)

Super Lig (Turkey)

127

33

416

3.28 (5.05)

12.61 (19.40)

Juventus (BIT:JUVE)

Serie A (Italy)

398

87

523

1.31 (2.02)

6.01(9.25)

AS Roma (BIT:ASR)

Series A (Italy)

222

(25)

363

1.64 (2.52)

NM

AFC Ajax (ENXTAM:AJAX)

Eredivisie (Netherlands)

98

94

0.96 (1.48)

23.5 (36.15)

Olympique Lyonnais (ENXTPA:OLG)

Lique 1 (France)

167

(3)

432

2.59 (3.98)

NM

1.97 (3.03)

11.63 (17.89)

Internationally-Listed Soccer Clubs Nominal Average (Adjusted Average)

Manchester United is listed on the NYSE and is in many ways very similar to top US sports franchises. While European soccer is more competitive and
less monopolistic than US sports (many leagues in a geographic area, risk of being demoted to sub-league, etc.), Manchester United has established a
large global fan base, top payroll, and consistent league success, similar to the NY Yankees.
However, other European soccer clubs are less comparable for a variety of reasons:
1.
2.
3.
4.
5.

Traded OTC
Traded in less liquid, lower valuation markets
Teams themselves in riskier countries
Less monopolistic than US franchises
Ultra small cap and illiquid

Other Fan-Based Entertainment Content and Facility Operators

Rev

EBITDA

Live Nation Entertainment (NYSE:LYV)

5,542

626

WWE (NYSE:WWE)

700

73

EV

EV / Rev

EV/ EBITDA

7,080

1.28

11.31

1,396

1.99

19.12

Live Nation provides a good comp to value excess stadium revenues from non-baseball events and sponsorship revenue. 1.28x revenue can be applied
to stadium and sponsorship revenues in excess of stadium debt repayment. At this stage, not enough information is available to determine the amount of
this revenue.
WWE, while not a true professional sport, continues to draw loyal fans and over 700,000 subscribers to WWE Network. However, the large discrepancy
between traditional US sport franchise multiples (avg. 5-6x) and the WWE multiple (~2x) is caused by the relative difference in TV contracts. Upon
renewal of WWEs disappointing new broadcasting contract in 2014, WWEs stock fell by nearly 45%. A 50% increase in value of existing contracts
was meek in comparison to MLBs 400% contract increase and typical MLB/NFL//NBA increases of ~100%.

December 14th, 2016