Yesterday, MLB announced that a vote to approve Jim Crane as the new owner of the Houston Astros has been delayed as the league continues its due-diligence process. The announcement came as a bit of a surprise as earlier this month the vote was said to be a go.
The reasons as to why have been speculated and run the gamut. Here’s 5 reasons why there could be a delay:
1) The Large Group of Investors in Crane’s Group
The $680 million sales agreement reached between Drayton McLane and Crane on May 16 would mark the second-highest sale price for an MLB club behind only the Chicago Cubs sale in 2009, which included Wrigley Field and a 25 percent stake in Comcast SportsNet Chicago. With that much money needed, Crane has pulled in a large group of investors, each of which needs to go through MLB’s background check. Crane has reportedly brought on more minorities, which brings up…
2) Crane’s Prior Dealings with Discrimination and War Profiteering
Crane dodged this bullet when he was part of efforts to purchase the Astros in 2008, the Cubs in 2009, and Rangers in 2010. This time around, he’s not been as lucky. There was a class-action lawsuit in the late ‘90s claiming Crane’s company Eagle Global Logistics operated under discriminatory fashion with blacks, Hispanics, and women of child-bearing age. During the Iraq war, the Justice Dept. charged Crane’s company with war-profiteering charges, with one high-ranking executive serving jail time over the matter. The issue has been said to “be in the past” but it is one issue of several that Crane faces.
3) Backing Out of the Astros Sale in 2008
Crane was very nearly the owner of the Astros in 2008. He was so close that the club had drafted up the press release on the sale agreement when Crane backed out at the 11th hour. That was said to upset McLane and it certainly gave the owners second thoughts about Crane. Indeed, it was said repeatedly in reports during both the Cubs and Rangers that Crane would not be “approvable”. Whether that gap has been totally crossed is unknown, but is surely part of the discussion with Crane.
4) The Astros, Dodgers and Debt
One thing that has consumed a great deal of the league’s time has been the on-going battle with Frank McCourt and the Dodgers who are now in bankruptcy. Discussions about McCourt’s highly leveraged purchase have been a repeated part of the conversation with fans and the media. From Is Jim Crane the Astros Savior, or the Next Frank McCourt?:
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.
(SEE Who's to Blame for Frank McCourt Owning the Dodgers?)
So, is the financial structure of the Crane deal holding things up? Are owners thinking about how Frank McCourt has gone sideways? Probably not.
According to league sources, the biggest difference between Frank McCourt and Crane boil down to two things: a) He’s highly liquid in his assets. Where McCourt had collateral tied up in property, Crane has cast. b) As noted at the top of the list, Crane has a very large investor group with which to spread financial responsibility. McCourt had no other investors.
5) The Astros Into the American League
The last of the 5 has to be brought up, but it’s the easiest to answer. With all the buzz about radical realignment in which the Astros would move to the American League, thus giving 15 clubs in the AL and NL, questions surfaced yesterday as to whether Crane’s possible balking at the move was part of the delay. The answer is, no. For one thing, there’s no certainty that the realignment will happen any time soon, if at all. That’s not the holdup.
So, What’s the Reason for the Delay?
Everyone has their theories, but the truth be known, it’s many things and not just one thing holding up the vote to approve the sale. Commissioner Selig isn’t going to call the vote until there is complete consensus. Word is that could be in 10 days, or two weeks, or it’s entirely possible (although unlikely) that Crane is never approved and McLane goes back to the drawing board.
What’s known is this: if the votes are lined up, waiting until the November owners meetings does not have to occur. The vote could take place via conference call, if necessary.
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, and is a contributor to Forbes SportsMoney blog.. He 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 (select his name in the dropdown provided).
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