This week in “Last Week in BizBall”, the Mets search for minority investors, plus many tidbits including prospective new Dodgers’ owners.
THE METS SEARCH FOR MINORITY INVESTORS
You already know that THE business of baseball story last week was the announcement made by Mets owners Fred and Jeff Wilpon that they have retained Steve Greenberg of Allen & Co. to assist in their search for strategic partners. In other words, the Wilpons want to sell a minority stake in the Mets. The announcement also made an indirect, but unmistakable, link to the search for minority partners with the lawsuit brought against the Wilpons (more accurately, Sterling Equities) in December by Irving Picard. Mr. Picard is the court-appointed trustee representing the victims of Bernard Madoff’s infamous Ponzi scheme. According to press reports, Mr. Picard has so far recovered $10 billion from former Madoff clients who profited from his Ponzi scheme. Mr. Picard is reportedly seeking to recover at least hundreds of millions dollars from the Wilpons and perhaps as much as $1 billion. Again reportedly, Mr. Picard’s lawsuit alleges that the Wilpons either knew, or should have known, that they were profiting illegally. The NY Times reported last week that, two years ago, Wilpon and Saul Katz (President of Sterling Equities) were forced to repay close to $13 million after a different Ponzi scheme collapsed. If last week’s reports are correct, the Wilpons have been searching for investors over the last year (which predates the filing of Mr. Picard’s lawsuit). The Wilpon’s public announcement that they are seeking investors likely indicates that their need for cash has become more urgent. Last August I brought attention to reports that the Mets controlled RSN SportsNet New York had borrowed $450 million, more than half which would be used to pay dividends to the channel’s investors, including the Wilpons. That same report included the news that the Mets holding company had refinanced $375 million of debt. At the time, the SportsBusiness Journal reported that as a result of MLB playing hardball with the lenders in the Texas Rangers bankruptcy, combined with uncertainty over the end result of the Wilpon’s investments with Madoff, Fred Wilpon and Saul Katz were required to “… put up more personal collateral than they wanted.” to secure the loan. Jeff Wilpon told reporters last week that raising cash via loans from banks or insurers was also an option but given the uncertainty surrounding the Picard lawsuit, the considerable debt already associated with the club and stricter loan convenants for sports lending, that may well be only posturing. Fred Wilpon will reportedly meet with Commissioner Selig this week. Might MLB loan the Mets cash as they did the last year with the Rangers? Might MLB’s debt-service rule that forbids club debt exceeding more than ten times EBITDA prevent additional borrowing? All in all, it was an ignominious week for the Mets franchise. According to the WSJ, “…experts say, Friday's announcement could mark the beginning of the end of the Wilpon family's controlling interest in the team.
SELECT READ MORE TO SEE FURTHER DETAILS ON THE MINORITY SALE OF THE METS, PLUS THIS WEEK'S TIDBITS, WHICH INCLUDES AN UPDATE ON A POTENTIAL SALE OF THE DODGERS
Going forward, will the Mets have difficulty concluding agreements with potential minority investors? At first glance, one would think no. After all, according to the 2010 Forbes valuations the Mets are the 3rd most valuable MLB franchise, worth only slightly less than the Red Sox. And NYC is baseball’s mecca, home to a disproportionate number of the very wealthy typically attracted to such “vanity buys”. Ken Belson wrote, “Given the concentration of wealthy individuals and companies in New York, and the scarcity of professional teams for sale in the country’s largest city, the Mets should find no shortage of potential suitors.” Belson quoted Marc Ganis, president of SportsCorp, “There are plenty of people who want to be aligned with a glamour team like the Mets and New York,” But Mr. Belson also astutely observed that, “A sale, though, depends on what the Mets are willing to sell and under what conditions.” And that is the challenge the Mets face. In recent years, franchise owners have struggled to attract minority investors. In May 09, Lyman G. Bullard, Jr., who practices sports law in New England, wrote in an opinion piece How franchise sales will fare in challenging credit climate, “The challenge will be getting minority partners to sign on. Typically, minority partners have put up substantial capital for very little in return other than good seats and bragging rights.” In June 09 I brought attention to reports that Cubs owner Tom Ricketts was struggling to raise $150 million for his acquisition of the club via a combination of “perk notes” and “non-voting shares” in the ball club. The aforementioned WSJ report noted that:
The move the Mets are trying to pull off has become difficult in recent years in the sports business. The market for sports franchises essentially dried up in 2008, and while values have rebounded the past 18 months, the limited-partnership market has been more challenged, said Rob Tillis, principal at sports-investment advisory firm InnerCircle Sports.
In the past two years, Texas leveraged-buyout king Tom Hicks tried to bring in limited partners to finance his ownership of the Texas Rangers baseball team, the English soccer club Liverpool and the Dallas Stars hockey team.
But when no buyers appeared who were willing to hand their money over to Mr. Hicks and cede all control to him, Mr. Hicks, who needed to raise money to meet his debt obligations, was forced to sell all three entities, though the Stars remain on the market.
The New York Times Co. has been trying to sell its 17.75% stake in New England Sports Ventures, owners of the Boston Red Sox, for more than a year, but so far has sold just 6.6% of its investment.
The Wilpons were adamant in the press last week that they were only interested in selling a 20-25% stake in the Mets. Ken Belson reported that that might prove problematic, “Andrew Murstein, president of Medallion Financial Corp., which has invested in sports teams, said that a 25 percent stake in the team without any control would be less attractive to potential buyers. “People who buy teams want to put their imprints on them, and without control, you can’t do that,” Murstein said.” The Wilpons also insisted that any sale would NOT include an interest in the club controlled RSN SportsNet New York. Only two days after the Wilpons announcement that they were soliciting offers for a minority stake in the club, a group led by Martin Luther King III made public their interest in investing in the Mets. But, there was a big but. King’s group is, at least for now, seeking “at least a 50 percent” stake in the franchise. The aforementioned Rob Tillis told the WSJ, “This is going to be all about the size of the check, valuation and control," "Also, does the limited partner get a piece of SNY?" From Tom Van Riper’s blog at Forbes, “If it’s a just a suite and capital calls, there won’t be much interest,” says industry consultant Marc Ganis of Sports Corp. Limited, who thinks any serious offer would likely have to include capital call protections and an interest in the Mets’ SNY cable network. “The market is good, but the investors are very picky,” he says.
Naturally there was speculation that the Mets minority partners in SportsNet New York, Time Warner Cable and Comcast, could invest in the franchise. There was also speculation that Cablevision could step forward. Comcast is partners with at least several MLB franchises in RSNs (most recently with the Astros in the yet to launch CSN Houston). Investing in the Mets would mark a strategic change for TWC and Cablevision. TWC “sold” the Atlanta Braves to Liberty Media in 07. Last year Cablevision spun off a new company which includes 3 pro sports franchises and two RSNs.
The New York Mets remain one of MLB’s most valuable franchises. They are one of two franchises in the best baseball market in the world. They play in a ballpark only two seasons old. They own a majority stake in a lucrative RSN. They signed the last of the pre Lehman Brothers stadium naming rights deals. (20 years / $400 million with Citigroup) The Wilpons challenge in attracting investors to the Mets is not proving that it is a viable and valuable asset. The Wilpons challenge is limiting the control they relinquish over the Mets. And as LWIB ended, whether the Wilpons eventually retain any control over the Mets appeared far from certain.
- Sooner or later the Los Angeles Dodgers will be for sale and I think you all understand why (and are probably sick of it). LWIB, Andy Fixmer reported for Bloomberg that billionaire Alec Gores “…is preparing a bid for the Los Angeles Dodgers…” According to the report, fellow billionaire and brother Tom Gores might be part of the same group bidding for the franchise. The report also claims that others interested in buying the franchise are Alan Casden (another billionaire), Mark Cuban (also a billionaire) and a group fronted by Steve Garvey (probably not a billionaire).
- Don Walker blogged about the Brewers’ new scoreboard. More specifically, Don wrote about how the state-of-the-art picture quality of the TV replays coming to Miller Field this season will not include replays of close calls. Evidently the Brewers think it is time for MLB to allow fans at the ballpark to view replays of close (even blown) calls. I agree with the Brewers.
Rick Schlesinger, the Brewers' executive vice president of business operations, told Marquette University law students on Thursday that he would like MLB to change.
With a new scoreboard, Schlesinger said he wants to see if the Brewers can "push the envelope" a little this upcoming season so that fans can get a glimpse of close calls.
"If we get a warning letter from MLB for being too aggressive on replays, well, OK," Schlesinger said.
- According to a Harris Interactive poll, 17% of Americans who follow at least one sport identified baseball as their favourite sport. By comparison, 31% cited pro football, 12% college football, 6% pro basketball and 4% college basketball. Harris has been conducting this poll annually since 85 and in recent years baseball’s numbers are virtually unchanged. They are down 6% from 85.
- According to TicketNews.com, the Atlanta Braves have launched a season-ticket exchange. "This innovative and easy-to-use online tool will give fans who are interested in purchasing season tickets the opportunity to find partners to share the cost and will help our current season ticket holders organize and distribute their tickets," Derek Schiller, executive vice president of sales and marketing for the Braves, said in a statement. "We feel strongly that this is a simple way for fans to find others who share the same passion for Braves baseball and become an Atlanta Braves season ticket holder."
- It’s official, Triple A has returned to Tucson. Ballpark Digest reported on the unveiling of the logo of the Tucson Padres.
- Do you care who the commentators will be this season on ESPN Monday Night and Wednesday Night Baseball? If you do, Fang’s Bites has the press release here.
- Yankees’ owned RSN YES was the most watched RSN in the US for 2010. That marks the 8th consecutive year that YES has been able to make that claim. At least that’s what YES says. Fang’s Bites has the press release here.
- About 30 years ago a fellow Canadian in British Columbia quit his job and launched Baseball America from his garage. Because of that, Allan Simpson will be inducted into the Canadian Baseball Hall of Fame later this year. Read Allan’s story here.
Pete Toms is senior writer for the Business of Sports Network, most notably, The Biz of Baseball. He looks forward to your comments and can be contacted through The Biz of Baseball.
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