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Jeff Moorad has been a superstar agent of major league baseball players and co-owner and chief executive at the Arizona Diamondbacks and the San Diego Padres.
Following that, he’s moved onto what he considers the most interesting sport in the world – Formula 1 (F1) racing.
“It’s the only global league,” Moorad said. “Formula 1 is a global league that literally has regular season competitions on five continents.
“More than 1 billion fans watch it annually. 95 million people watch every one of Formula 1’s 24 races every year.
“It’s a powerful fact.”
Moorad’s venture into F1 began in 2020 with an unusual turn when his firm took a stake in McLaren Racing, which was on the verge of bankruptcy. Since then, McLaren Racing has ridden to higher fame as part of “Drive to Survive,” one of the most successful shows ever on Netflix. Last December, McLaren driver Lando Norris secured the team’s first F1 Constructors’ Championship in 26 years with victory in the season-ending Abu Dhabi Grand Prix.
To top it off, the Business Journal estimated that the Moorad-led investment of $250 million in 2020 has increased by more than six fold to over $1.5 billion.
Ironically, Moorad didn’t grow up loving car racing.
“Once I got involved in the sport, I began to understand the impact that it has globally. It took me a bit of educating to get it.”
Baseball and Nascar
Moorad began as a sports agent in the 1980s, working alongside Leigh Steinberg, who became the inspiration for the hit movie “Jerry Maguire,” starring Tom Cruise.
During their ownership, the agency maintained the largest client practice in the NFL for more than 15 years, representing 25 quarterbacks, along with the second-largest Major League Baseball practice in the industry. Steinberg & Moorad was sold in 1999 to Winnipeg-based Assante Corporation for reported $120 million.
In 2004, Moorad took a minority ownership stake in the Arizona Diamondbacks, where he served as the team’s CEO, overseeing the day-to-day operations of the franchise. In 2009, he headed an ownership group that purchased a 50% stake in the San Diego Padres, where he became vice chairman and CEO of the club.
In his spare time, Moorad joined others including legendary Dallas Cowboys quarterbacks Roger Staubach and Troy Aikman in buying a small Nascar one-car team that was “nearly profitable,” he recalled.
“Ultimately, I had to focus on my day job, which was running the San Diego Padres,” he said.
After he helped negotiate a $1.5 billion regional sports network agreement with Fox Sports, the Padres were sold for $800 million, the third-highest price for a major league baseball franchise at the time.
In 2013, he created Moorad Sports Partners with the idea of disciplined investments in sports; the co-founder was Peter Ueberroth, who became famous for organizing the 1984 Los Angeles Olympics.
He initially became interested in a F1 team called Force India, which was available for purchase because it was on the verge of bankruptcy. When he found out that Jahm Najafi, a friend from his days in Arizona where he is a minority owner of the Phoenix Suns, was also considering purchasing the team, the pair joined forces.
Najafi knew Greg Maffei, who was at that time CEO of Liberty Media and who engineered a $4.4 billion purchase of the F1 league in 2017. Moorad and Najafi learned firsthand why the value of the league’s teams was going to rise.
“We were outbid by Lawrence Stroll, who paid £125 million more than our offer,” Moorad said. “In our business, if you lose by that much, you walk away happy.”
Moorad and Najafi, who renamed the firm MSP Sports Capital, continued examining possible F1 teams.
The pair got to know the key investors at Mumtalakat Holding Co., the sovereign wealth fund of Bahrain and the majority shareholder of McLaren Automotive Group, which owned McLaren Automotive and McLaren Racing.
Around April of 2020, at the height of the pandemic, Moorad and Najafi received a call from Paul Walsh, who had just become executive chairman of the McLaren Group and who was previously CEO of Diageo, the world’s largest spirits company, saying the racing team was looking for strategic capital, ideally with sports expertise.
The automotive manufacturing side of McLaren was “generally okay,” but the board wasn’t inclined to invest more into the racing team, which was heading for the British version of bankruptcy. The racing team at that time was losing about £65 million on annual sales around £188 million.
(Ironically, on the day of this Business Journal interview, Mumtalakat completed the sale of McLaren Automotive to the sovereign wealth fund of Abu Dhabi. The latter fund now owns a stake in McLaren Racing and sits on its board.)
Moorad and Najafi went looking for investors in the racing team, finding several of whom were skittish about a league that shortened its season during COVID-19.
Eventually, its investors included four family offices, including Rob Walton of Walmart lineage and whose family owns the Denver Broncos as well as private equity firm Ares Management and UBS O’Connor, a hedge fund subsidiary of Swiss bank UBS.
“They saw the same value opportunity that we did,” Moorad said. “It wasn’t so much our pitch, but their analysis happened to land in the same place.”
The Investment
Before investing, Moorad met McLaren Racing CEO Zak Brown in Bahrain and London for in-depth meetings. The two hit it off because the latter was a big St. Louis Cardinals baseball fan.
“When I walked in, he said, ‘Hey, you’re a baseball guy right?’” recalled Moorad. “I’m like, well, yeah, I guess so, and he said, ‘I named my first kid Maguire.’
“That was the beginning of a terrific relationship that continues today.”
MSP’s investment was an initial 15% holding rising to a maximum 33% by the end of 2022. In 2020, McLaren said it valued the British racing outfit at £560 million pounds ($740.5 million).
“Jahm and I put together a structure that was essentially a debt investment that had significant warrants tied to ownership, along with an annual coupon,” Moorad said.
Brown late last year told reporters that by the end of 2020, “we were definitely on the brink.
“We knew we could make it through the year, but we were in a situation where if we didn’t have a cash injection, we would have been at risk,” he said, adding that he was “always confident” that the shareholders would not let the company reach insolvency.
Brown was one of the crucial keys to the deal because he knew how to generate revenue through sponsorships, which have risen seven-fold in the past five years, Moorad said. McLaren’s webpage shows more than 50 sponsors, including Google and Goldman Sachs.
“The truth is success on the sponsorship side of the business preceded the success on the track, so at the end of the day, it was all about Zak and his leadership of the entire business. We’ve not been disappointed.
“The performance of late has been nothing short of sensational.
“If you’ve been around sports for any periods of time, you learn that winning is important, but it’s not the only thing. These are scarcity assets that you know whose valuations are driven by the fact there are only 10 teams in the league. There’ll be 11 when Cadillac joins next year.”
He noted viewership is rising steadily and so are the rights fees.
In 2023, Forbes valued the McLaren team at $2.2 billion, based on six times 2022 revenue. That was already a valuation four times higher than when MSP Capital invested in 2020.
It’s certain to be higher nowadays. After having won the 2024 Constructors Championship, it could be valued like Ferrari and Mercedes-Benz teams, which Forbes valued at $4 billion in 2023. If the McLaren team is valued at $4.5 billion, MSP’s – stake may well be worth a Business Journal estimate of $1.5 billion. Moorad declined to comment on the team’s value.
Moorad, whose love of the sport includes putting an actual F1 car in the yard of his Balboa Island home during Christmas, said he’s “opportunistic” in his investments.
“It’s really about aligning with high-level management teams and with a business that has a chance to grow and prosper,” Moorad said. “We’ll only invest if we can be a value add to that equation and be able to help the business progress.
“At the end of the day, McLaren has turned out to be a fabulous experience.”