As club sales go in Major League Baseball, the prospective sale of the Astros to Jim Crane could be one of the more controversial in the last decade. For all we know, Crane could wind up taking the reins of the club, and take them to the postseason promise land. He could also become a shining beacon for the Houston community, and a pillar of MLB’s ownership ranks. If so, everything outlined below will be forgotten.

But, when looking over the deal, if there’s a name that comes to mind, it’s Frank McCourt. And no, it’s not about divorce.

A Debt-Laden Deal: Is Crane Heading Down the McCourt Path?

The similarities between McCourt and Crane cover two areas. For lack of a better term, they were both bridesmaids in club sales. For McCourt, it was the Red Sox. For Crane, it was the Cubs and Rangers (and technically, the Astros once prior). Baseball has a tendency to bring in owners that truly want in, if they meet the financial muster.

Which brings us to what will likely be the most concerning aspect of any approval by the league’s 30 owners. Crane’s purchase, like McCourts’, is heavily debt-laden.

Of the $680 million purchase, just under half ($300 million) is going to be financed with debt.  According to Mike Ozanian of Forbes, “In 2010 the Astros had operating income of $14 million, so if Crane parks $300 million of debt on the team the franchise would be in technical default of the league’s debt limit, which is 10 times earnings before interest, taxes, depreciation and amortization.”

That’s Forbes, not MLB’s numbers. But, there are other aspects of the sale that are concerning from a debt perspective.

Whether it’s to keep partial ownership or get around MLB’s debt rules, Drayton McLane will reportedly keep a $65 million minority stake in the club. Crane will have just $70 million and $125 million skin in the game. Crane’s partners are pitching in $300 million, and believe it or not, the rest will be a loan out of Major League Baseball.

You have to ask yourself this: The sale of the Astros will be the highest after only the Cubs sale to the Ricketts. Is McLane and MLB more concerned about setting market value than possibly setting themselves up for another debacle, such as McCourt wound up in?

Who’s Coming Along for the Ride?

As for the principle investors that are part of Crane’s group, they are:

John Havens, Bill Morgan, Doug Bauer, John Hauck & TSI Holding Company, Greg Allen & family, Neil Kelley & Partners, Will Galtney & Jeff Hines, John Eddie Williams & Cary Patterson and Milton Carroll & Partners.

The Issue of Minorities and Women: The NAACP Will Be Watching

I didn’t make the story up, I simply dug through the archives. But, when I wrote Are Jim Crane's Past Comments on Blacks and Women Blocking Ownership of the Astros? the comments that came forth showed that fans (and possibly one or more with direct interest in the deal) were upset.

In 1997, complaints were filed with the Equal Employment Opportunity Commission regarding Crane’s Eagle USA Airfreight and its position on hiring blacks and women of child-bearing age. The EEOC finalized a scathing 104 page report (most EEOC reports are said to run 3-5 pages), found that to be true, and added that Crane’s company conducted a practice of paying “female and minority employees less than white men who do similar work; did not investigate employee complaints of sexual harassment; and destroyed evidence that the company was instructed to retain as part of the two-year EEOC investigation,” according to a Houston Chronicle article from 2000.

That resulted in a $9 million settlement, with $8.5 million going to back pay and damages that were allocated to the class members, which consist of African-Americans, Hispanics, and female employees employed by Eagle at any time between December 1, 1995 and December 30, 2000, and former applicants who sought employment at Eagle during the period December 1, 1995 to December 31, 2000. In addition, Eagle paid $500,000 to establish a Leadership Development Program, a program intended by Eagle and EEOC to benefit minorities and women by preparing them for leadership roles in employment at Eagle.

But, in fairness, that’s not all entirely true.

In 2005, U.S. District Judge Lynn Hughes ruled that approx. $6 million be credited to Eagle. A review found that 203 of 2,073 claims had merit. About $900,000 was paid to applicants or employees, according to the court, according to a report that ran in the Houston Chronicle yesterday.

The issue of Crane’s past intersecting with the Astros purchase isn’t likely to be going away anytime soon.

Crane was asked about the matter yesterday by ABC  13 in Houston.

"If you've done your homework on that, there really wasn't a problem there," Crane told ABC 13. "We can address that later. But I don't think it's going to be a problem whatsoever."

If the sale is approved, the NAACP in Houston will be watching.

"We are deeply concerned that someone, that has a broad reach throughout the community and across the country regarding employment ... has such a dismal record in the area of discrimination. As such this is someone that should be monitored very closely in the area of employment discrimination as it relates to minorities and woman," the group said in a statement."

FORE!

This isn’t to pick on Crane, but as press releases go, the one yesterday from the Astros has some details in it that are, well… a bit interesting.

The details out of the release, rightfully, tout Crane’s business acumen. That he is CEO and President of Crane Capital Group, Inc., and is the owner of Champion Energy Services, which ranks in the top five of nonutility-affiliated retail electric providers in the United States and among the top 20 retail electricity companies in the nation. In August of 2008, Crane formed Crane Worldwide Logistics (CWL), a premier provider of customized transportation and logistics services. CWL has and continues to grow rapidly with experienced members of Crane’s management team and sales force at the helm. The three-year-old company will do in excess of $400 million in sales in 2011.

That’s information you want. It tells you how your new owner is going to run the Astros.

But, then Crane’s PR group added this:

In addition to his love of baseball, Crane is an avid golfer. In 2006, his .08 handicap earned him the number one CEO Golfer ranking by Golf Digest. Crane acquired the Floridian, a private golf resort in Palm City, FL, in 2010.

Either Crane is bragging, or somehow golf is going to be how sponsorship deals might get done… on the golf course.

The golf info was an odd add in. It’s a personal interest thing, but one would be hard to remember such fluff in a press release touting a new potential owner in MLB in a long, long time.

SPECIAL BUSINESS OF SPORTS NETWORK REPORTS:
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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, as well as a contributor to FanGraphs and Forbes SportsMoney. He is available for hire or freelance. 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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Comments (38)

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Thanks, Maury
written by Larry@IIATMS, May 17, 2011

This is the information we all need.

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Phone call to Bud
written by Reality Check, May 17, 2011

"Hello, Bud? It's Frank McCourt on line 2. Something about, 'If you're going to allow Crane to get around MLB's debt rules, he'll be suing your a$$,' or something to that effect."

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Difference
written by Randolph, May 17, 2011

Operating Income and EBITDA are not the same thing...so Crane could in fact NOT be in violation of the 10x EBITDA rule as the Astros EBITDA is certinaly igher than it's OP INC.

Also, you have to break out the difference on the debt piece between the club sale and the regional network. The network will certainly be higher leveraged than the Club, as media orgs generally have more debt and higher gross margins than traditional enterprises

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Difference
written by Randolph, May 17, 2011

Operating Income and EBITDA are not the same thing...so Crane could in fact NOT be in violation of the 10x EBITDA rule as the Astros EBITDA is certinaly igher than it's OP INC.

Also, you have to break out the difference on the debt piece between the club sale and the regional network. The network will certainly be higher leveraged than the Club, as media orgs generally have more debt and higher gross margins than traditional enterprises

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This is a strange deal with red flags galore
written by Astros Fan, May 17, 2011

Interesting article. As "Reality Check" mentioned above, it's hard to see how MLB could approve a heavily-leveraged deal like this at the same time MLB is moving to seize the higher-revenue Dodgers for reasons of debt. Even more astonishing is that MLB itself could be giving Crane access to $300 million in financing while it's choking off the Dodgers' access to credit (and delaying approval of a multibillion-dollar TV deal).

Drayton McLane insists this deal will "sail through the approval process," but I count at least six issues that could or should make the other 29 MLB owners think twice before voting "yes" on this deal:

1. $300 million in debt would be bad enough for a high-revenue team like the Cubs or Red Sox, but it could be an absolute killer for a last-place team like Houston that's stru*gling at the gate and has a very weak farm system. This is not to say MLB should roll out the red carpet for Mark Cuban or some other big-spending billionaire, but this amount of debt for MLB's weakest team is a recipe for both short-term and long-term disaster.

2. Jim Crane and his supporters/minions can say what they want about the EEOC discrimination case, but the quotes and allegations are damning. Sure, "only" 203 claims might have been paid, but that's still a much higher number of people than even Marge Schott was alleged to have insulted or harmed. It's also highly likely that a huge number of people with valid claims never knew about the claim pool. For one thing, Crane's company was reportedly caught destroying records that might have led to other successful claims. For another, how many people search the business pages for news about discrimination settlements by companies to which they sent a resume 5 years ago? If even 10% of the EEOC claims are true, this could cause MLB endless bad publicity for years to come.

3. As if the EEOC situation wasn't bad enough, Jim Crane was also alleged to have attempted the business equivalent of throwing the World Series: He was accused of tanking the value of his OWN (former) COMPANY -- the same one involved in the EEOC case -- in order to lower the cost of taking the company private. If you're a rich MLB owner with a lot of your net worth sitting in a stock portfolio that's dependent upon CEO performance, would you be happy with this type of guy or this type of business ethics? (See "The EGL debacle all comes down to Jim Crane" -- http://www.chron.com/disp/stor...73467.html)

4. The similarities to Frank McCourt don't end with the debt aspect of the deal. Jim Crane also went through a very nasty divorce, and he lives a lavish lifestyle replete with a private jet and mansions in at least three cities. He and his current wife are fixtures on the high-society circuit in Houston, Nantucket, and elsewhere. And, as with McCourt, Crane has faced allegations of using his companies as his personal piggy banks. (See "Transferring a*sets" -- http://www.houstonpress.com/20...ng-a*sets/)

5. Crane has a lot of prior MLB history that, at least at the time, rubbed a lot of people the wrong way. Crane reportedly blamed the economy for walking away from his handshake deal to buy the Astros from Drayton McLane in late 2008, but then he bid on the Cubs just a few months later in 2009. Crane then partnered with Mark Cuban, who himself is not Mr. Popularity among MLB owners, and almost killed the Greenberg/Ryan Rangers deal in 2010.

6. According to various FEC disclosures available online, Jim Crane is and has been a big contributor to left-wing politicians, and his investment group is full of left-leaning lawyers who made their money by suing big businesses. Meanwhile, MLB owners tend to be politically conservative, and aside from Peter Angelos and perhaps one or two other left-leaning lawyer-owners, MLB owners have always been averse to inviting litigious people into their exclusive club. MLB last strayed from this by approving the litigious Frank McCourt, and that now seems likely to blow up in MLB's face within days, if the rumors of an impending McCourt v. MLB lawsuit are accurate.

MLB owners obviously want and like to see rising sale prices, but it's hard to see how MLB can approve Crane at all, let alone in such a highly-leveraged fashion. It's hard to imagine this owner and this deal being approved at the same time Frank McCourt is being forced out and Mark Cuban is being kept out.

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It's official
written by You know who, May 17, 2011

"Astros fan" is not an Astros fan. He's a shill.

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Maury,
written by You know who, May 17, 2011

More Astro hate.. Not a surprise.

So because Crane plays golf, it must mean he's a lousy businessman. You are seriously trying way too hard. Did Crane buy out the lease of your comic book store?

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...
written by MauryB, May 17, 2011

Your funny...

Of course, you'd never know this because, well, you've never followed my work.., Tal Smith is someone I've had the good fortune of knowing for years. Talk to him often. I have a personal affection for the Astros given their history. Judge Hofheinz is a person I enjoy studying about and his development of the Astrodome.

I'm dispa*sionate about the Astros situation. You'd have to study ownersip in the league to fully get what's going on currently.

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...
written by You know who, May 18, 2011

Okay fair enough kind sir.

I ask you this though. Why would McLane, who always makes his profit, hold such a significant stake in a team that is doomed to fail under Crane?

I GOT IT!

McLane has some inside news about the world ending on saturday. He, Tal Smith and Richard Justice are going to cryogenically freeze themselves. They will read "A Wrinkle in Time" and vanish into another dimension. The End.

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...
written by You know who, May 18, 2011

I'm very interested in the ownership situations in professional sports. I'm just not in favor of demoralizing a potential owner over his golf game, political preference, or malicious ideals in his business. I'm sure Jim Crane will do anything to keep himself afloat, but I ask you again. What other exceptionally wealthy people at the top of the food chain act differently? Just because Crane was served a lawsuit alleging all these horrible unconstitutional violations doesn't make him a bad businessman. If he were a bad businessman, then he would be dead or locked up like Enron's finest.

I know some will read this and say I'm wrong for defending unjustifiable acts by a potential owner in such a prestigious league like Major League Baseball, but this is the right circumstance. I know if everyone does something, that doesn't make it right. Big business is cut throat though. You have to make "every dollar count". I recently heard Crane say this in a PR release by the Astros. You can't tell me that Crane is the only one who has resorted to similar tactics in the workplace. He just got caught.

So should we only hold the people who were sued accountable? I can somewhat understand your idea that Crane is a bad person, but bad businessman? I think that is stretching your stories a little far. I accept that if hypothetically I walked into a Wal-Mart and randomly ran into Drayton McLane, he probably wouldn't like me. He may even tell me to get a haircut. I don't care though. He would just be an old typical dbag. I would still buy his tickets though. More if the team is competitive, but if not I'll still attend 5-10 games a year.

Just be a success and make yourself responsible for spending some of the money you make on a legitimate World Series run like DMC did in 05 and 06. Spend more through the draft and less through free agency. Sit back and let the people you hired do the job, but hold them responsible. I honestly feel like I'm reading quotes straight off the press releases from Crane. I feel very safe with this guy running the business and maybe this all was just a misunderstanding. Hopefully this isn't an attack on a guy for being left-winged when our current president isn't the most likeable guy at the moment.

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To "You know who" ...
written by Astros Fan, May 18, 2011

I've been an Astros fan for three decades. Do you really think I'd care this much otherwise?

Also, I've been reading Maury's work for a long time, and I've never gotten the slightest hint he's a right-winger. I'm quite sure his reporting and commentary here have nothing to do with Jim Crane's politics.

I noticed you asked this above: "Why would McLane, who always makes his profit, hold such a significant stake in a team that is doomed to fail under Crane?"

Well, for one thing, McLane has refused to confirm he's retaining a minority interest in the team, so apparently you have some inside information. But a*suming you're right that McLane is retaining a minority interest, the answer to your question is very, very simple: If McLane leaves money in the team, he'll a*suredly be doing so in order to help the heavily-leveraged Crane group get around MLB's debt limits. This is as plain as day. Otherwise, McLane wouldn't be selling the team at all, or he'd only be selling 49% or less.

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McLane is retaining an interest...
written by Randolph, May 18, 2011

because he did not get the valuation he'd hoped for...so he gets some liquidity out of his original Astros investment while holding some equity (in either the team and/or network-- the reporting is still unclear here) in hopes of a better valuation down the road. It's just math, not a conspiracy

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...
written by You know who, May 18, 2011

Well buddy, my "inside information" comes from Maury Brown himself. Oh you must have not read the article you are commenting on. It's obvious you just skimmed through my post as well. Wanna know why Maury doesn't show his political stance? Because he knows it's irrelevant to baseball. I'm just curious how Crane's political stance is so tangible and relative to baseball.

I'm grateful you're an Astros fan, but who do you want to own the team? Tony the Tiger? The NAACP will be breathing down Crane's neck, so everything he does will be examined through a microscope. If I were betting whether the billionaire will be successful or unsuccessful, I would go with the first. Why would I doubt someones business decisions when they obviously have done so well for themselves?

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Reply to Randolph and "You know who" ...
written by Astros Fan, May 18, 2011

Randolph -- There's no way Drayton McLane will blindly leave $65 million in the team simply in the hopes of future appreciation. McLane currently holds all the cards because he's the majority owner. Non-controlling minority stakes, meanwhile, are often worth far less than their proportional value and are often very difficult to sell (at all, let alone for proportional value). If McLane retains a minority interest, he'll a*suredly have a "put" option at a minimum predetermined value, and the only reason he'll be doing so at all is to help Crane get around MLB's debt limits.

---

To "You know who" -- Drayton McLane has not publicly confirmed he's retaining a minority share, either to Maury Brown or anyone else. He specifically refused to answer that question when asked on Monday, so please don't accuse me of not reading well or "skimming" articles before I comment.

When you say "Wanna know why Maury doesn't show his political stance? Because he knows it's irrelevant to baseball," that's just showing you're a troll. A few comments above, you were accusing Maury of bashing Crane for political reasons. Now all of a sudden, you're pretending you never made the original comments.

When you say, "If I were betting whether the billionaire will be successful or unsuccessful, I would go with the first," that just shows you don't know what you're talking about. Drayton McLane is a billionaire, but neither Jim Crane nor none of his 10 to 15 partners are. Jim Crane has a lot more money than I do, but by MLB standards, he's a lightweight -- just like Frank McCourt was when he entered MLB. We've all seen how that has worked out.

If you want to have a discussion based on facts, I'll stay here all day. But please don't keep taking us in circles.

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...
written by You know who, May 18, 2011

No I definitely just questioned whether he was bashing Crane over his political views.

Who do you su*gest buys the Houston Astros then? I have to hear this.

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Who should buy the Astros? ...
written by Astros Fan, May 18, 2011

I don't have a bunch of names on speed dial, but if the Rangers could find deep-pocketed Texans to buy the team, I a*sume the same could be true of the Astros. You should remember a few things:

First, Jim Crane is not a billionaire. He's only like the 400th-wealthiest person in Texas (which, don't get me wrong, is awesome for Jim Crane, but it makes him a lightweight in MLB).

Second, Crane's bid involves the highest or second-highest amount of debt in an MLB team sale.

Third, when Drayton put the team up for sale, he said he was in "no hurry to sell" and that the process "could take 2 or 3 years." So why the sudden hurry to sell to heavily-leveraged Jim Crane? If McLane truly cares so much about the Astros, why is he leaving them in the hands of people who will start, on Day 1, with $300 million in debt, a weak big-league team, and a very weak farm system?

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Fox Deal
written by Hoov, May 18, 2011

The writer of this article did not do his homework. The Astros and the Rockets have a very lucrative network deal with Fox that will add a nice some to the EBITDA of the Astros and more than likely that is taken into consideration.

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It's actually with Comcast, ...
written by Astros Fan, May 18, 2011

... and it doesn't start until 2013 for the Astros.

Also, negotiating carriage rights while in last place is not likely to yield any huge windfalls, even with the big jump in local broadcast rights being seen in the sports biz.

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Astros fan, next time...
written by Randolph, May 19, 2011

You get a put option agreed to in either a SPA or APA, let me know. I'll want some of that action! It's more likely the Crane group has a right-of-first refusal on Drayton's shares.

I concede to your point that perhaps the seller kept a piece as a means to deal with MLB's EBITDA rules, but given the lack of reporting on the Astro's actual EBITDA, we simply don't know (and this is further confused by the network issue).

But Drayton's retention is either a.) a work around, b.) valuation related, or c.) ego

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There's no logical reason ...
written by Astros Fan, May 19, 2011

... McLane would retain a minority interest other than to help Crane get around MLB's debt rules. None. Nada.

From there, if you think McLane is going to keep a measly 10% share *without* having the value of that share agreed to in advance, you're very naive. A minority interest in a recently-sold last-place team that's carrying $300 million in debt is *maybe* worth 50 cents on the dollar vis-a-vis its proportional value (i.e., a 10% share isn't worth 10% of the team's appraisal; it might be worth 5%).

I suppose it's possible the whole thing is a fraud, and that McLane and Crane inflated the sales price by $65 million (on paper) in order to make it look like the owners, including McLane, have more cash/equity in the team, but that seems doubtful. I'd bet just about anything that McLane has a formal or informal "put" option for any retained minority share that guarantees McLane a minimum value of that share. Anything else makes no business sense whatsoever.

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One more thing ...
written by Astros Fan, May 19, 2011

It's possible that McLane's "put" option on any retained minority share will be written up as a "right of first refusal" for Crane (as Randolph theorized above), but if so, that's because MLB would likely consider a formal "put" option to be debt for purposes of MLB's debt-load rules. If McLane retains a minority share, there's no doubt he'll have a confirmed valuation of that share before he cedes control of the team.

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...
written by Randolph, May 20, 2011

The value of McLane's shares were (or will be) determined at close (via the puchase price).

The future value of his retained shares will be determined by the market.

He McClane somehow has a "a confirmed valuation" of the future value of his equity, then Crane is, simply, a moron.

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We're going in circles ...
written by Astros Fan, May 20, 2011

Randolph - There's no "market" for a non-controlling interest in a recently-sold, last-place team that's carrying $300 million in debt. If you don't understand this, then there's no sense continuing with this discussion.

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Who says...
written by Randolph, May 20, 2011

there's no market for a non-controlling interest in a leveraged enterprise?

The fact that this enterprise was recently sold (McLane is clearly not looking to flip his retained stake), in last place (a moment in time), or carrying a debt load (and your point is?) are not relevant.

Non-controlling equity stakes and debt instruments are bought and sold everyday.

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Please, you're making a fool of yourself
written by Astros Fan, May 20, 2011

A minority share of the Red Sox has been for sale for three years with no takers. And you're telling us McLane will have no trouble getting proportional value for a 10% share of a recently-sold, last-place, debt-laden team? Give us a break.

If the world was full of people who wanted to pay $65 million for a non-controlling 10% share of a baseball team, then why are Jim Crane and his **36** partners -- yes, 36 partners -- buying the Astros with $300 million in debt?

Jim Crane himself is rumored to only be putting $75 million of his own money into the deal. And you think some rube will pay $65 million for a 10% share? Ha ha ha.

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Incredibly, looks like smooth sailing for Crane
written by Astros Fan, May 21, 2011

Per media reports, Crane is meeting with Selig on Monday, and the deal is expected to garner quick approval.

I'm absolutely shocked by this. The discrimination business aside, allowing Jim Crane plus 36 (!!) partners to buy a last-place team with $300 million in debt seems like the height of malfeasance (and hypocrisy, given MLB's ongoing seizure of the Dodgers).

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...
written by Randolph, May 23, 2011

I did not say anything about the world being full of people wanting to buy the Astros.

"Jim Crane himself is rumored to only be putting $75 million of his own money into the deal. And you think some rube will pay $65 million for a 10% share?"....uh,this is relative how?

Never mind, I'm bowing out-- you come from a fan perspective and it's painfully obvious you have no LBO and/or broader M&A experience. Perhaps even math is a challenge?

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Randolph ...
written by Astros Fan, May 23, 2011

This has been a frustrating discussion. You keep making a*sertions without any references or facts. Anyone can toss out acronyms like "LBO" and "M&A" and try to seem smart, but you never get around to addressing the underlying issues here or explain *why* normal LBO or M&A principles apply to an MLB sale.

Jim Crane has been trying to buy an MLB team for four years, and yet he needs 36 partners and $300 million in debt to buy the Astros. Further, Crane is reportedly investing $75 million of his own money, and *no* other members of his group are putting in a similar amount.

And yet, you keep insisting that Drayton McLane will have no problem at all in finding someone who will pay him at least $65 million for a non-controlling 10% share. It makes no sense whatsoever.

Please, Randolph, tell us: Where are all these people who want to spend $65 million or more on a non-controlling share of an MLB team? If you know a bunch of these people, you could become an MLB power broker almost overnight.

If a minority share of the cash-cow Red Sox has gone unsold for more than THREE YEARS, it seems like the market for a minority share of the Astros would be even weaker. But, hey, I'm all ears, Randolph. Tell me exactly how and where I'm wrong.

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...
written by Randolph, May 24, 2011

Oy vey-- what a combination of strawman arguements and red herrings you present in this alleged discussion.

Pay attention, I know it's hard for you to keep up with big acronyms like "LBO" and "M&A."

Buyers arrive at valuation via discounted cash flows, terms, conditions, representations, and warranties.

I have no idea if the Red Sox are a "cash-cow"-- they certainly do not meet the definition of one (high market share, low growth, generating free cash flow) or if a minority share is even for sale, but if the seller is unable finalize a sale of said stake it's because seller/buyer are unable to agree on valuation as defined above.

FYI, a number of sports teams across multiple industried are owned via partnerships. Galatioto Sports Partners make a fine living putting together such partnerships.

I do not recall su*gesting "McLane will have no problem at all in finding someone who will pay him at least $65 million for a non-controlling 10% share." I simply su*gested McClane retained a share of the enterprise because he simply did not get the valuation he wanted for the sale of his larger stake and hopes the value of his retaied stake grows over time. I would further supposed he think there's nice upside in the network, so why not retain a smallish piece and see where it goes.He doesn't need the cash for the small stake and perhaps he likes being a MLB owner (ego).

As for *why* normal LBO or M&A principles apply to an MLB sale, it's simply because they have for generations. Ask Bob Galatioto (he's a very approachable man). And, honestly, why wouldn't they?

After all, baseball teams are businesses (small businesses, actually), despite what strange and silly boys like you think.

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That didn't answer much ...
written by Astros Fan, May 24, 2011

Randolph - First of all, the minority share of the Red Sox that's been for sale has been discussed in dozens of articles over the past 2-3 years, so it's kind of odd that a big expert on team sales, such as yourself, claims not to even know part of the Red Sox is for sale.

Second, it's borderline clownish for you to su*gest that the Red Sox aren't a "cash cow" given that they've been No. 2 in MLB revenues for years. And even if they're not a true cash cow in the sense of annual profits or dividends, the appreciation of the Red Sox a*suredly outpaces the appreciation of the Astros, making the Red Sox share a much better investment than the Astros share.

Third, Drayton McLane is retaining *ZERO* percent of the RSN, so if the "nice upside" of the network has been part of your rationale during this discussion, you've been wrong from Day 1.

Fourth, I've never heard of Bob Galatioto. I've heard of *Sal* Galatioto, the president of Galatioto Sports Partners, but I have no clue what he has to do with this. Tell us, Randolph, does *Sal* Galatioto routinely find people who want to spend $65 million for a non-controlling share of a debt-laden team?

Fifth, I'm well aware that a lot of sports teams are owned by partnerships. In the Astros case, they're not being bought by a partnership of people paying $65 million each for each 10% share. They're being bough by one guy (Jim Crane) who's investing $75 million, and then 36 (!!) additional partners who are contributing an average of $8 million each. And yet you keep insisting that finding a buyer for Drayton McLane's $65 million minority share won't be a problem. Very bizarre logic, Randolph.

In the past four years that he's been pursuing ownership of an MLB team, Jim Crane apparently hasn't found a single person willing to pay $65 million or more to be Crane's minority partner, and yet you seem to think McLane has a Rolodex full of such people. Totally bizarre and totally uninformed, Randolph.

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Also ...
written by Astros Fan, May 24, 2011

Randolph said: "I simply su*gested McClane retained a share of the enterprise because he simply did not get the valuation he wanted for the sale of his larger stake"

- First, it's McLane, not McClane.

Second, McLane *did* get the valuation he wanted; he simply didn't find a buyer with enough cash to effect the transaction at that valuation and within MLB's debt rules, which is the ONLY reason McLane is retaining a share.

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...
written by Randolph, May 26, 2011

Once again fool...well, wait a second for that, you did just say the Sox are a cash-cow even though they don't meet the definition of a cash-cow, right? That sums up your logic skills, or lack thereof..

Now, once again fool, if in fact the Sox have a minority stake for sale and are having trouble either finding a buyer or completing a transaction, the reason is because a difference is valuation-- read ASKING PRICE! I've never "insisted" on anything else.

FYI-- Bob is Sal's brother and serves as COO (another "big acronym"-- can you figure out?) of GSP (doh! another one!) and is the primary deal worker, while Sal serves as the face.

I personally have completed several M&A transactions in various forms, including leveraged, but have never been involved in a sports team-related deal. I do know Bob, but only in pa*sing.

Now, run along, your sweet vintage Astros jersey is ready for pickup from the cleaners.

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Fenway Sports Management
written by Cla*s Action, May 26, 2011

Fenway Sports Management (ownership of the Red Sox) is one of the most lucrative ownership groups in all of sports. If you looked up "cash cow" they would be one listed

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Dear Randolph ...
written by Astros Fan, May 26, 2011

The fact you've resorted to name-calling tells me you don't have much more to offer. Anyone can toss out acronyms like LBO and M&A and try to sound authoritative, but we're now 34 comments into this thread and you still haven't refuted any of my comments.

The simple fact is, getting proportional value for a non-controlling 10% share of a recently-sold, debt-laden, last-place team will be very, very difficult for McLane to do if he doesn't have any sort of "put" option with Crane's group. This is especially true since the Astros are selling at a large premium relative to the Forbes valuation (and the general market valuation -- i.e., the other bidders stopped around $500M).

As for the Red Sox, I haven't seen their books, so I don't know that they're a cash cow and you don't know that they're not. My point is, the Red Sox are No. 2 in MLB revenue, and there have been no reports of them LOSING money or having any type of financial problems. The Astros, on the other hand, are on their way to a third or fourth consecutive season of declining attendance, and they could be a basement-dweller for several more years to come.

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...
written by Randolph, May 26, 2011

Definition of a cash cow is an enterprise characterized by 3 things: high market share, low growth, generating free cash flow.

Sox:
High market share? Check. Though you can measure market share any number of ways for a ballclub (% of industry revenue, attendance, etc.), Sox clearly meet this criteria.

Cash flow? Check. Though none of us are privy to their books, it seems that Sox FSM are largely profitable.

Low Growth? No. In fact, the value that FSM to the Sox was significant growth of revenue (and attendance and merchandising and and and...).

The Sox would be more appropriately cla*sified as a Star-- high market share and high growth.

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...
written by Randolph, May 26, 2011

AF-- you might want to ask the Mets about selling a non-controlling interest in a baseball club.

What do I need to refute? You keep su*gesting that I've taken a position that I have no taken (this is known as a strawman arguement).

I have resorted to name-calling because you are a simpleton which makes it quite frustrating to deal with you

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Semantics ...
written by Astros Fan, May 26, 2011

Randolph - The general definition of a cash cow is a company that makes big profits, especially relative to others in a specific market. If you want to waste time on semantics, that's up to you, but my point was and remains obvious: the Red Sox are much stronger financially than the Astros.

How about we get back to the Astros. You keep calling me a fool, but you've refuted none of my comments or theories above.

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If anything, the Mets sale ...
written by Astros Fan, May 26, 2011

... proves *MY* point, not yours.

If 30 to 49 percent of the Mets is worth $200 million, then 10 percent of the Astros most a*suredly is NOT worth $65 million. How you think the Mets sale helps your argument is beyond me.

(Oh, and Einhorn's share of the Mets could lead to majority control within 6 months, but who cares about a triviality like that.)

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