Big Ten nearing decision on $2.4 billion deal with California pension investment fund in landmark move within college athletics

A pension fund in California may soon invest in the Big Ten Conference.

An investment fund of the University of California retirement system is in talks with the nation’s largest and perhaps most valuable college athletic conference to provide nearly $2.4 billion in immediate cash infusions to 18 schools and help launch Big Ten Enterprises, the conference’s long-discussed subsidiary.

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People with knowledge of the negotiations spoke to Yahoo Sports under condition of anonymity because they were not authorized to talk about the potential 20-year deal with the UC retirement system’s investment fund (better known as UC Investments, a $190 billion entity responsible for managing the system’s portfolio). UC Investments manages the UC system’s endowment and retirement savings and is independent of the universities within the system, such as UCLA and Cal.

The Big Ten’s yearlong investigation into the private investment world is at an eye-opening juncture, and a decision is expected within days. Under the proposal, UC Investments would finance a potentially groundbreaking deal with the league to distribute an average of $140 million in upfront payments to each of the conference’s schools.

Last week, Big Ten executives and commissioner Tony Petitti stepped up efforts to socialize with presidents, athletic directors and school board members and finalize deeper details of the concept. Those with knowledge of the matter told Yahoo Sports that stakeholders of the conference’s two biggest brands, Ohio State and Michigan, are positive about the idea, paving the way for a vote as soon as next week.

However, the decision must be taken unanimously. The Big Ten must extend the rights agreement for another 10 years, from 2036-46. This measure ties the programs together over a period of time to ensure stability in a period of great change and puts the league in a position to accommodate possible structural realignment changes such as the Super League.

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Details of the deal: At least $100 million for each school

In what is described as an “equity sale,” UC Investments will provide the conference with a one-time equity distribution of approximately $2.4 billion to acquire a 10% stake in Big Ten Enterprises and a share of the league’s annual distribution. The $2.4 billion will be distributed unequally among the league’s 18 schools, with some also used to create Big Ten Enterprises, a private arm of the league that aims to better monetize the conference’s assets in this more professional environment of college athletics.

All schools will receive at least $100 million in upfront, one-time payments, and payments for various programs will exceed $150 million; This is a major cash infusion during a financially stressful time for athletic departments. Eight-figure bonuses are also expected to be awarded to schools in fiscal 2037, when the Big Ten’s deal with TV partner FOX is scheduled to expire, likely triggering a significant increase in media rights fees.

The league is expected to introduce a new unequal distribution model derived from conference media rights and Big Ten Enterprises, incorporating a performance and marketing mechanism most similar to the unequal distribution structure recently implemented by the ACC.

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Specific distribution models may change as negotiations continue over the weekend and potentially into next week. It is not a reflection of permanent tiering of schools, as upfront payments and unequal annual distribution can increase value, such as winning football and basketball championships and attracting more television viewers.

What’s in this for UC Investments?

It is clear how the pension fund will generate returns on its starting capital. UC Investments gets the opportunity to sell its share of the league, along with an annual distribution cut, after a 15-year “hold” during which the sale was prohibited. Any sales must be approved by league members.

Distributions to UC Investments could be significant and could benefit hundreds of thousands of former public university employees as part of the retirement fund. This year, the Big Ten’s 12 former schools are expected to make about $75 million each in conference payouts; Under the current TV contract, that figure could be as high as $90 million. The league is likely to renegotiate the media rights agreement three times over the 20-year life of the agreement.

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Although its deal 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 pursuit of private equity and capital, Big Ten officials shifted their attention solely to UC Investments during a meeting in July with UC Investments Chief Investment Officer Jagdeep Singh Bachher, who has more than doubled his portfolio to nearly $200 billion during his decade in office.

The fund made a bid late in the process to outbid traditional private equity firms such as Apollo Global Management and Blackstone, both of which were thought to be the only finalists. The offer from UC Investments is believed to be a significant raise from these firms, and the Big Ten’s “implied valuation” is stated to be $24 billion.

The pension fund is considered a “passive investor” as it is expected to take no role in the conference’s day-to-day operations and will likely take a limited role in Big Ten Enterprises, where it is expected to have a seat on a 10-member board of directors. Despite this being described as a “private equity deal,” the passive nature of the deal is comforting to Big Ten stakeholders who were nervous about entering into a deal that would be the first of its kind in college athletics.

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Why the Big Ten needs private investment

Sportico first reported in January that the Big Ten was stepping into the private equity world with banker Evercore as a way to form Big Ten Enterprises, and ESPN revealed more financial details of the concept last week. The firm and its specific financial figures were mostly unreported.

At the Big Ten’s men’s basketball media day on Thursday, Petitti touched on “modernizing the conference” through marriage with private equity.

“Whether or not we decide to make a strategic investment is something we consider with the goal of continuing to increase 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 were allowed to directly compensate their athletes under a limited revenue-sharing system that emerged from the NCAA’s groundbreaking settlement in three often cited House antitrust cases.

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Most schools in the Big Ten, Big 12, ACC and SEC are spending more than $20.5 million on their athletes this year; a budget gap that many athletic departments have filled with increases in university subsidies, often from student fees and other state dollars.

The upfront cash to Big Ten schools will allow them to work with more financial flexibility around costs like stadium projects, revenue sharing for players and even the purchase of a coach.

In one fascinating case, the Big Ten’s cash flow could affect the athlete revenue-sharing pool limit under which schools operate as part of the House compromise agreement. The $20.5 million cap in Year 1 (July 2025-June 2026) may increase, especially considering new funds raised by Big Ten Enterprises. The revenue share pool cap averages 22% of certain budget categories of strong conference programs, including conference distribution, ticket sales, and sponsorships.

In an interview this week, House plaintiffs attorney Jeffrey Kessler believes vaccination could trigger a reconsideration of the pool limit. “It’s possible,” Kessler said. “We’ll have to see how this works.”

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The cap is already set to automatically rise 4% next year — from $20.5 million to roughly $21.3 million — but House plaintiffs have the authority to hold three “reviews” to reevaluate the figure in the 10-year settlement.

Will there be more conferences coming soon?

If the Big Ten agrees to the deal, other conferences may be forced to respond with an equity or capital deal of their own, especially the SEC, the Big Ten’s closest peer within the college sports structure. The league is using global financial services firm Goldman Sachs to explore the possibilities of such a deal.

Some are perhaps even further along in this effort, such as the Big 12, whose board has twice seriously reviewed capital transfer and equity deals in the past 16 months and continues to pursue them under the leadership of commissioner Brett Yormark. Others, such as American commissioner Tim Pernetti, are working on similar deals.

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At least a half-dozen individual schools have seriously explored or are seriously pursuing equity and equity partnerships.

But at a time when college administrators are trying to push legislation through Congress, not everyone in college sports is on board with such a quest, especially those on Capitol Hill.

On Thursday, Sen. Maria Cantwell (D-Wash.) suggested during a speech in Washington, D.C., that the Big Ten’s equity deal could threaten the tax-exempt status of its schools. “Are you going to let someone take what is actually a public resource and make money?” he asked. “This is a real problem.”

There are reactions even from within the Big Ten. Many members of various university boards expressed public frustration with the effort, saying they were only shown a limited portion of the plan.

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But at many universities, the Big Ten’s decision to implement this 20-year, $2.4 billion agreement rests not with the boards of governors but with the university presidents and chancellors who are mostly behind the agreement.

Many people see the agreement as a three-part concept: financial partnership with the pension fund; the creation of Big Ten Enterprises; and expanding the granting of rights.

The creation of Big Ten Enterprises may be the most interesting. The privatized nonprofit is expected to operate under a CEO who answers to a board of representative member schools and is tasked with consolidating the assets of the league and its schools into one place as a way to better monetize and generate more revenue, including categories such as ticket sales, sponsorships and others.

The business may ultimately be involved in athlete compensation as well. In fact, the Big Ten office, unlike other leagues, is responsible for sharing the income from membership distribution with the athletes.