Ownership deal highlights difference between Wilpon, McCourt

It’s good to be rich, and even a measly $200 million can buy you one heck of a deal:

David Einhorn, who has been selected to join the New York Mets ownership group as a minority partner, has a path to majority ownership, a source familiar with the still-not-finalized terms told ESPNNewYork.com.

Einhorn has agreed in principal to purchase roughly 33 percent of the team for $200 million, which will infuse cash and keep the organization solvent in the immediate future. In three years, according to the source, Einhorn has an option to up his stake to 60 percent, although principal owner Fred Wilpon and his family have an opportunity to block Einhorn from gaining that majority stake.

The source said the Wilpons can stop Einhorn from gaining the majority share essentially by returning Einhorn’s initial $200 million investment yet allowing him to keep the 33 percent share of the team.

In other words, in exchange for buying the minority stake and infusing cash into the organization now, in three years Einhorn will either have his initial investment returned to him while still retaining his minority share, or he’ll get to become the majority owner of his favorite baseball team as a kid, which just happens to be one of the most valuable franchises in the business. It doesn’t get much better than that in the scope of good buys. What does it mean for the rest of baseball though?

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McCourt and Wilpon in very different circumstances.

Blogger Murray Chass smells a hypocrite:

But now that [Bud Selig] has taken the first step toward forcing McCourt to sell the Dodgers, Selig has created the need to deal with Wilpon. Selig certainly considered the Wilpon issue before he initiated serious action against McCourt so you know he is prepared to defend doing nothing with Wilpon. But he also knows that he will face pressure to exhibit fair and equal treatment.

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Midnight Tweets (updates on Gardner, Wilpons & very cool Mariano/Mettalica vid)

(A daily recapping of the news and notes via Twitter that may be of interest to Yankee fans and baseball fans alike) Ledger_Yankees MLB announces Eliseo Batista of the Yankees’ Dominican Summer League team has been suspended 50 games for violating PED rules. #nyy Ledger_Yankees Gardner felt tightness/soreness in right shin last night. Tightened up today so he left the game. SI_JonHeyman russell martin looks so bad behind the plate today burnett will soon be begging for posada SI_JonHeyman #jays gm anthopoulos said he had no inkling of arm issue w/ marcum and was in fact talking extension before trading Continue reading Midnight Tweets (updates on Gardner, Wilpons & very cool Mariano/Mettalica vid)

Midnight Tweets (updates on Gardner, Wilpons & very cool Mariano/Mettalica vid)

(A daily recapping of the news and notes via Twitter that may be of interest to Yankee fans and baseball fans alike) Ledger_Yankees MLB announces Eliseo Batista of the Yankees’ Dominican Summer League team has been suspended 50 games for violating PED rules. #nyy Ledger_Yankees Gardner felt tightness/soreness in right shin last night. Tightened up today so he left the game. SI_JonHeyman russell martin looks so bad behind the plate today burnett will soon be begging for posada SI_JonHeyman #jays gm anthopoulos said he had no inkling of arm issue w/ marcum and was in fact talking extension before trading Continue reading Midnight Tweets (updates on Gardner, Wilpons & very cool Mariano/Mettalica vid)

Things Go From Bad to Terrible for the Wilpons

I said the other day that I assumed the plaintiff in the Madoff related lawsuit against the Wilpons was probably reaching a bit with his most damning claim; that the Wilpons should have known Madoff was running a scheme and therefore they have to pay out more money on top of what they profited from the scam. Well, today it’s time to walk that back quite a bit, because the Times has an absolutely devastating story this morning detailing the relationship between Madoff and the Mets even more clearly. A few snippets:

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The Wilpons: Not newbies on this Ponzi scheme fraud thing

The hits just keep on coming for the Wilpons and while you might think I am enjoying this, subtly or less-than-subtly, it’s just so ugly for the game and that’s not a good thing:

For Wilpon and Katz, the episode did not garner anywhere near the public attention their entanglements with Madoff have, but there are striking similarities. Indeed, a review of court records and interviews suggests the debacle with Israel’s hedge fund, Bayou, was a painful precursor to the Madoff case.

The firm Wilpon and Katz started, Sterling Stamos, was accused of having withdrawn money from a fund run by Bayou after detecting evidence of possible fraudulent activity. The firm took out nearly all of its $30 million from the fund months before it collapsed.

And the eventual tie-in to the Madoff case:

According to two lawyers involved in the case against the Mets, the trustee, Irving H. Picard, argued in a lawsuit filed in December that the history of Wilpon and Katz’s dealings with Madoff meant they knew or should have known it might be a scheme, and that, as a result, other victims were entitled to hundreds of millions of dollars above and beyond what Wilpon and Katz might have made as profits. “Some of the legal principles adopted in Bayou are the same ones that the trustee is applying,” said Richard Kirby, the lead lawyer for the creditors committee in the Bayou case.

In other words, Picard is using the age-old “fool me once, shame on you; fool me twice, shame on me” mantra. Except the Wilpons got fooled twice. Continue reading The Wilpons: Not newbies on this Ponzi scheme fraud thing

Wilpon’s insistence on selling only a non-controlling interest is going to be tested

Remember that whole “intend to maintain the majority, controlling interest” thing about the Wilpon’s selling a stake of the Metsies? I reserve the right to be entirely surprised, but it looks like the list of interested parties is growing but not for that minority interest that the Wilpon’s want to sell:

The son of the late civil-rights leader is uniting with some heavy hitters, including Mets legend Ed Kranepool; entrepreneur Donn Clendenon Jr., son of the 1969 Mets World Series MVP; TV executive Larry Meli; and a number of unnamed deep-pocketed investors, The Post has learned.[…]

King declined to comment on the particulars, but Meli said he and his group are looking to purchase at least 50 percent of the club. That could be a roadblock, but Meli said he hopes the two sides can work together.

“I think in order for it to make sense it would have to be at least a 50-50 arrangement,” said Meli, a trusted friend of King.

In other words: Without control in the operations of the Mets organization (either initially or attainable in the future), the list of financial life preservers will be limited. I contend that if the Wilpon’s truly need the liquidity to resolve the pending lawsuits, they will have very little choice but to sell more than they’d like.

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Wilpons’ integrity in question?

Some very interesting info coming out of Murray Chass today and as I have said before, so long as it’s baseball-related story-telling, Chass is still a good read:

The Picard lawsuit is critical. Not only is Picard seeking hundreds of millions of dollars, but according to the Times report, he has also alleged that Wilpon knew or should have known that Madoff was running a crooked scam. That’s why the trustee seeks many millions more than the $571 million he said the Wilpon companies withdrew.

“The really troublesome thing for Wilpon is Picard alleges that Wilpon knew or should have known,” the lawyer said. “That goes to Wilpon’s integrity and reputation. Wilpon is very vulnerable. He can’t let that suit go forward because the risk that he was culpable is too great.

“Picard has Wilpon by the tail and Wilpon knows it. Picard knows Wilpon can’t run the risk of a jury or a court decision against him.”

As we said last week, it’s going to be very difficult for Wilpon to have his cake and eat it too, meaning raising a significant amount of money AND still maintain control.

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Feeling the squeeze, the Wilpons have engaged investment bankers

There are some things that, once you see/read/hear them, you instantly know every other alternative has been considered and there’s no other alternative. The sick entering hospice care. The Angels trading for Vernon Wells. Ever since the Madoff news broke, the Wilpon’s claimed the Mets organization was largely unaffected by the scam. And now, the Mets are hiring investment bankers as they are pursuing minority investors, aka “strategic partners”:

The Wilpon family, stung by losses and litigation stemming from convicted swindler Bernard Madoff’s Ponzi scheme, is considering selling a minority stake in the the New York Mets to infuse cash into the organization.

Principal owner Fred Wilpon and chief operating officer Jeff Wilpon announced Friday they had hired Steve Greenberg, managing director of Allen & Company, to explore “potential options including the addition of one or more strategic partners.”

Color me concerned. And here’s what made me chuckle:

The Wilpons added that regardless of the outcome, they intend to maintain the majority, controlling interest in the Mets.

Let’s get one thing straight: The Metsies might want to keep the team, or rather control of the team, but if there’s a person/group out there with the resources, you can be sure that they will make a run at outright ownership of the organization. Selling a minority interest, say 30-40%, will require more than $250 million dollars, according to Forbes valuations (via BoB). I am not sure how many singular groups will have an interest in forking over that much cash without control. Now, if the Wilpon’s are considering cutting this into bite-sized pieces (<5% each), maybe there are enough people interested. There will be more to come, to be sure.

[Note: HBT has the full PR here]

Continue reading Feeling the squeeze, the Wilpons have engaged investment bankers