Thomas Ricketts has been selected as
the final bidder for the Chicago Cubs,
based on a large cash component, and
a profile that matches MLB's criteria.
In September of last year, just before the bottom truly dropped out on the economy, an associate of mine called to talk about the sale of the Cubs. “Watch Tom Ricketts,” he said.
It made sense. In July, the man that seemed wired to land the Cubs, Wrigley Field, and a 25 percent stake in Comcast SportsNet Chicago, was out. When the first bids were submitted for the storied franchise and its associated assets, Madison Dearborn Partners CEO John Canning, Jr.’s offer came in well below the other bidders. Canning, who was a minority owner in the Brewers when Bud Selig owned the club, found that his connections to MLB held no sway to the almighty dollar.
Shortly thereafter, a source close to the process confirmed that if Ricketts could dodge the endless stream of pale economic news and stay up with the other potential bidders, he would be the preferred choice (see Rumor: Ricketts Will Land Chicago Cubs).
As the storm raged on about Mark Cuban’s bid for the Cubs, Ricketts seemed the next best thing for baseball after losing Canning. While he wasn’t born in Chicago, he does bleed Cubbie Blue. A man that once lived in an apartment across the street from Wrigley Field, he met his future wife in the bleachers at the Friendly Confines, a near storybook aspect with which the league could hitch their cart to.
But, the decision on the final bidder would not be MLB’s call to make. The sale, while an MLB asset, is not truly under their control.
When Sam Zell spearheaded the $8.2 billion purchase of the Tribune Co. in April of 2007, it moved the company from public to private. Zell’s chief concern did not include the Cubs – a commodity owned by Tribune that could be sold above its book value. They are, after all, the Cubs, a cornerstone franchise in MLB and in all of sports. As is often the case with those that purchase sports franchises, the value is also intangible – a bragging right; a trophy. Zell, seeing this value, is looking to garner the most out of the sale, and is retaining a minority ownership in order to avoid the capital gains tax.
He’s not the only one interested in the deal.
Tribune was already saddled with a mountain of debt when Zell purchased it. As the economy went from a slow downward trickle into a cascading torrent, Tribune’s debt continued to mount to the point of bumping into a year-end debt ceiling imposed by its bankers last year – a violation of debt terms that limit borrowings to nine times its adjusted profits. Tribune had hemorrhaged $121.6 million in the third quarter of 2008, alone. The only recourse, it seemed, was filing for Chapter 11 bankruptcy protection, which Tribune did in early December of last year.
In what must have been a sigh of relief for the would-be buyers, the Cubs sale was not part of the filing, and allowed for the wandering deal to move forward without the courts in play. All of them had seen the credit industry take hit after hit, and were anxious to see the selection process winnowed down. Still, the creditors and the bankruptcy judge have a keen interest in seeing the maximum amount garnered from the transaction.
Just before the Dec. 1 deadline for final bids to be submitted, word came that Mark Cuban, the true wild card in the bidding mix, was being charged by the SEC for insider trading involving shares of Momma.com. While many saw this as the final nail in the coffin for Cuban, the truth was, his bids had been below several others in the mix, thus killing off any notion of Cuban winding up in MLB’s “Lodge”.
When all was said and done, three final bidders were left standing. Ricketts, the chief executive of Chicago investment bank Incapital LLC and the son of Joseph Ricketts, the founder of TD Ameritrade Holding Corp, Marc Utay, a managing partner with New York-based private equity firm Clarion Capital Partners LLC; and Chicago real estate executive Hersh Klaff of Clarion Capital who is partnered with Leo Hindery Jr. of InterMedia Partners.
As word arrived last week that Tribune was nearing the selection of the final bidder, the source close to the process said that while Ricketts was the favored, Utay was mounting a charge. Still I was told, “Ricketts seems to have slightly less on the table in total, but the structure of the offer seems well within reach of creditors. He’s got more cash in the deal. Utay’s deal will be more difficult; more debt to carry.”
Today’s selection of Ricketts bears this out.
While figures for all the bidders have not been leaked, word today is that Ricketts’ selection is based on an approx. $900 million offer. Ricketts will move into a 30-60 day exclusive window to get the deal closed.
And while there is little discounting that the money matters trump all others in this sale process, there are other considerations that made Ricketts the favorite. There was the aforementioned history of his relationship to the Cubs, but Ricketts also embodies the “family ownership” model, something that baseball has embraced and was most recently on display in the sale of the Washington Nationals when the Lerner family wound up being selected.
Ricketts was also wise in his selection of a law firm to help assist in the bidding process. Foley & Lardner, who has deep ties to baseball through the Nationals deal, and the current effort to complete funding for the new Marlins stadium was hired by Ricketts. It was a savvy move as MLB president and COO Bob DuPuy joined Foley & Lardner in 1973 just after graduating law school and became a partner in 1980.
After Tribune made their selection of Ricketts on Weds., they sent the three bids on Thursday to a committee for the unsecured creditors of Tribune with numbers replacing the names of the bidders. It was more of a formality than a key step in the process as the creditors had no veto power over Tribune's selection. By late afternoon, word arrived that Ricketts was most likely the finalist.
So, Thursday evening, Ricketts broke his silence on the matter, and confirmed his selection as the final bidder.
"My family and I are Cubs fans," he said in a statement. "We share the goal of Cubs fans everywhere to win a World Series and build the consistent championship tradition that the fans deserve."
Ricketts added that he would be working closely with Tribune and MLB to get the deal done by Opening Day, a challenge given the complexities ahead in reaching the sale agreement.
Still, for Cubs fans, MLB, and presumably Sam Zell and Tribune, the selection of Ricketts should be seen as a positive. Should he finalize the deal, Ricketts will undoubtedly be challenged in his new role as an MLB owner. On the day of his selection, the Cubs accused Under Armour of backing out of key sponosorhip deal, there is the renovation of Wrigley Field, and one of baseball’s largest player payrolls saddled with backloaded contracts. But, for the moment, fans have a name to hang the Cubs moniker on for the coming season. No longer will there be a corporate name, but rather a personal touch in the name, Ricketts.
Maury Brown is the Founder and President of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey. He is contributor to Baseball Prospectus, and is available as a freelance writer. Brown's full bio is here. He looks forward to your comments via email and can be contacted through the Business of Sports Network.
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