If the Big Ten does adopt its deal, other conferences may be forced to respond with an equity agreement of their own.
A California pension fund may soon invest in the Big Ten Conference.
An investment fund of the University of California pension system is in negotiations with the nation’s largest and perhaps most valuable collegiate athletic conference to infuse about $2.4 billion in immediate cash to its 18 schools and help create the conference’s long-discussed subsidiary, Big Ten Enterprises.
Those with knowledge of the negotiations spoke to Yahoo Sports under condition of anonymity as they were not authorized to speak about the potential 20-year agreement with the UC pension system’s investment fund, better known as UC Investments — a $190 billion entity responsible for managing the system’s portfolio. UC Investments manages the endowment and retirement savings of the UC system and is independent from the universities within the system, such as UCLA and Cal.
The Big Ten’s year-long exploration into the private investment world is at its seminal moment, with a decision expected in a matter of days. Under the proposal, UC Investments will finance the potentially groundbreaking deal with the league to deliver an average of $140 million to each of the conference’s schools in up-front payments.
Over the last week, Big Ten executives and commissioner Tony Petitti accelerated their efforts to socialize and finalize deeper details of the concept with presidents, athletic directors and school boards members. Stakeholders of the conference’s two biggest brands — Ohio State and Michigan — have warmed to the idea, paving the way for a vote as soon as next week, those with knowledge tell Yahoo Sports.
However, a decision must be unanimous. The Big Ten is required to extend its grant-of-rights agreement by another 10 years, from 2036 to 2046. This measure binds the programs to one another for the duration to provide stability in a time of great change, putting the league in position to address any potential structural realignment changes such as a super league.
Details of the deal: At least $100m for each school
In what is described as a “sale of equity,” UC Investments will provide an infusion of roughly $2.4 billion in a one-time equity distribution to the conference to own a 10% stake in Big Ten Enterprises and receive a cut of the league’s annual distribution. The $2.4 billion will be distributed to the league’s 18 schools in an uneven way, with a portion also used to create Big Ten Enterprises, a private offshoot of the league intended to better monetize the conference’s assets in this more professionalized environment of college athletics.
All schools will receive at least $100 million in up-front, one-time payments with several programs’ payouts exceeding $150 million — a massive influx in cash at a financially stressful time for athletic departments. Eight-figure bonuses to schools are also expected in fiscal year 2037, when the Big Ten’s deal with TV partner FOX is scheduled to end, likely triggering a significant media rights fees increase.
The league is expected to introduce a new uneven model for distribution derived from conference media rights and Big Ten Enterprises, featuring a performance and marketing mechanism most similar to the uneven distribution structure recently implemented by the ACC.
Specific distribution models are subject to change as negotiations continue through the weekend and, potentially, deep into next week. The up-front payments and uneven annual distribution are not a reflection of a permanent tiering of the schools as they can increase value, such as winning football and basketball championships and drawing more television viewers.
What's in it for UC Investments?
How the pension fund receives a return on its seed capital is clear. UC Investments earns the annual cut of distribution plus an ability to sell its portion of the league after a 15-year “hold,” when it is prohibited to sell. Any sale must be approved by league members.
The distributions for UC Investments could be significant and benefit hundreds of thousands of former state public university employees as part of the pension fund. This year, Big Ten’s 12 legacy schools are expected to earn about $75 million each in conference payouts, a number that could rise as high as $90 million under the current TV contract. The league is likely to renegotiate its media rights deal as many as three times during the 20-year length of the deal.
Though its agreement with Fox doesn’t expire until 2036, the conference is in the third year of a seven-year, $7-billion plus media package with Fox, NBC and CBS that expires in 2030.
In their private equity and capital pursuit, Big Ten officials only shifted their attention to UC Investments in July during a meeting with UC Investments Chief Investment Officer Jagdeep Singh Bachher, who in his decade on the job has more than doubled the portfolio to nearly $200 billion.
The fund made an offer late in the process to out-bid traditional private equity firms like Apollo Global Management and Blackstone — both thought to be sole finalists. The offer from UC Investments is believed to have been a significant increase from those firms and puts the “implied evaluation” of the Big Ten at $24 billion.
The pension fund is considered a “passive investor” as it is expected to take no role in the daily operations of the conference and a limited role in Big Ten Enterprises, where it is expected to have a seat on a board of possibly 10 members. Despite the characterization of this as a “private equity deal,” the passive nature of the agreement is comforting for those Big Ten stakeholders on edge about entering a first-of-its-kind agreement in college athletics.
Why does the Big Ten need private investment?
SPORTICO first reported in January the Big Ten’s foray into the private equity world with banker Evercore as a way to launch Big Ten Enterprises, and ESPN last week unearthed more financial details of the concept. The firm, as well as specific financial figures, has remained mostly unreported.
At the Big Ten’s men’s basketball media day on Thursday, Petitti addressed the issue of “modernizing the conference” with a marriage with private capital.
“Whether or not we decide to take a strategic investment is what we're considering, with the goal of continuing to grow opportunities for student-athletes,” he said.
The deal would come at a time of great financial stress on universities. For the first time this year, NCAA Division I schools are permitted to directly compensate their athletes under a capped revenue-share system birthed from the NCAA’s landmark settlement of three antitrust lawsuits, most often referred to as House.
Most schools in the Big Ten, Big 12, ACC and SEC are spending upwards of $20.5 million this year on their athletes — a budgetary hole that many athletic departments are filling with an increase in university subsidies, often from student fees and other state dollars.
The up-front cash to Big Ten schools would allow them to operate with more financial flexibility around stadium projects, revenue-share to players and even the costs of such things as a coach’s buyout.
In a fascinating situation, the Big Ten’s cash infusion could impact the athlete revenue-share pool cap that schools are operating under as part of the House settlement agreement. The cap — $20.5 million in Year 1 (July 2025-June 2026) — may rise considering the new funds, especially those generated by Big Ten Enterprises. The rev-share pool cap is 22% of an average of certain budget categories of power conference programs, including conference distribution, ticket sales and sponsorships.
In an interview this week, House plaintiff attorney Jeffrey Kessler believes the infusion could trigger a re-evaluation of the pool cap. “It’s possible,” Kessler said. “We’ll have to see how this works.”
The cap already automatically increases by 4% next year — from $20.5 million to roughly $21.3 million — but House plaintiffs hold authority to execute three “look-ins” to re-evaluate the figure over the 10-year settlement.
Will other conferences soon follow?
If the Big Ten does adopt its deal, other conferences may be forced to respond with an equity or capital agreement of their own, especially the Big Ten’s closest peer within the college sports structure, the SEC. The league has been using the global financial services company Goldman Sachs to explore possibilities around such a deal.
Some are perhaps even further along in this endeavor, like the Big 12, whose presidential board has twice seriously examined capital infusion and equity deals over the last 16 months and continues to pursue them under commissioner Brett Yormark. Others, like American commissioner Tim Pernetti, are working towards similar agreements too.
At least a half-dozen individual schools have seriously pursued or are seriously pursuing capital and equity partnerships.
But not everyone agrees with such a pursuit in college sports, especially those on Capitol Hill, at a time when college executives are attempting to push legislation through Congress.
As recently as Thursday, Sen. Maria Cantwell (D-WA) suggested during a speaking engagement in Washington, D.C. that the Big Ten’s equity deal may threaten the tax-exempt status of its schools. “You’re going to let someone take and monetize what is really a public resource?” she asked. “That's a real problem.”
There is pushback even from within the Big Ten. Several members of various university boards have expressed public frustration over the endeavor as they say they’ve only been shown limited pieces of the plan.
However, at many universities, the Big Ten’s decision to execute this 20-year, $2.4 billion agreement rests not with boards but with the university presidents and chancellors, who have mostly thrown their support behind the agreement.
Many view the deal as a three-part concept: the financial partnership with the pension fund; the creation of Big Ten Enterprises; and the extension of the grant-of-rights.
The creation of Big Ten Enterprises may be the most interesting. The privatized, for-profit entity is expected to operate under a CEO answering to a board of representative member schools and is charged with consolidating, in one place, the league and its schools’ assets as a way to better monetize and generate more revenue, including categories such as ticket sales, sponsorships and others.
The entity may eventually involve itself in athlete compensation as well. Already, the Big Ten office — unlike other leagues — is responsible for sharing revenue with athletes from its membership distribution.
Category: General Sports
