SBD/June 1, 2011/Franchises

Einhorn's 33% Stake In Mets Reportedly Could Lead To Majority Ownership

Einhorn reportedly can up his stake in the Mets to 60% in three years
Prospective Mets minority partner David Einhorn “has a path to majority ownership,” according to a source cited by Adam Rubin of ESPN N.Y. Einhorn “has agreed in principle to purchase roughly 33 percent of the team for $200 million, which will infuse cash and keep the organization solvent in the immediate future.” The source said that in three years 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 that the Wilpons “can stop Einhorn from gaining the majority share essentially by returning Einhorn's initial” $200M investment. In the “latest incarnation of the deal, if the $200 million is returned Einhorn's share of the team will be reduced from a third to a sixth.” Sources said that Einhorn is “shielded from any obligations should the Wilpons have an unfavorable resolution” in the suit filed against them by Bernie Madoff trustee Irving Picard (ESPNNY.com, 5/29). In N.Y., Thompson & Madden noted $100M of Einhorn's $200M investment will be “going toward what is believed to be about $600 million in debt carried by the club.” A source said that Einhorn is “structuring the deal so that he is in effect assuming the $100 million in debt as a protection in the event of a judgment against the Mets' owners” in the Madoff litigation. If the Wilpons "end up with a favorable ruling in the Picard case, Einhorn's $100 million in debt will then become equity" (N.Y. DAILY NEWS, 5/29). Also in N.Y., Thompson, Madden & O'Keeffe note if the Wilpons and Saul Katz "are going to retain control of the Mets, and their family's fortune, their best hope may be legislation introduced last week" by New York state Rep. Gary Ackerman. Ackerman's bill "would bar bankruptcy trustees" such as Picard "from suing investors victimized by a Ponzi scheme unless the trustee could prove they participated in the scam." Under the Ponzi Scheme Investor Protection Act of 2011 sponsored by Ackerman, the "only investors who would face 'clawback' litigation would be investors whom the trustee can legally establish were complicit in a Ponzi scheme or negligent investment professionals" (N.Y. DAILY NEWS, 6/1).

STRAIGHT FROM EINHORN: In N.Y., Andy Martino noted Einhorn during a press conference Monday “repeatedly declined to confirm that the agreement between him and the Wilpons contained a path” for him to become the principal owner. Einhorn said, "I can't disclose the terms, as per the agreement. It just wouldn't be the right thing to do. But let me just say this: When the agreement first came out, when the discussion first came out, there was a lot of reaction that this was a very one-sided agreement in favor of the Wilpons. And now as other stuff, much of which is not correct, has come out, there's a lot of you who think that the agreement is very one-sided in favor of me. And I think both of those characterizations are wrong.” Einhorn did “offer a timetable for finalizing the agreement.” Einhorn: "The goal is by the end of June, and there is a little bit of cushion in that. So if it goes smoothly, it will be a little quicker than that” (N.Y. DAILY NEWS, 5/31). Einhorn on Monday “declined to make any guarantees about reviving the franchise, saying he hopes the sale will be complete by the end of June but that the financial future of the team is ‘uncertain.’" When asked if he “could assure fans that the next few years will not be a slide into financial oblivion for the Mets,” Einhorn said, “I can’t make any such assurance.” Einhorn: “It will be what it will be, you know? It’s not that people aren’t going to try really hard to avoid that sort of a circumstance. But the future is uncertain and there’s a wide range of possible outcomes of all sorts of things” (NEWSDAY, 5/31). 

ON THE RIGHT PATH: The N.Y. DAILY NEWS’ Filip Bondy wrote the sale of a minority stake in the Mets is a “Hail Mary by the Wilpons and a smart play by the hedge-fund guy.” Bondy added, “While we wait for this narrative arc to play out in several acts, the interim period may well become the darkest of Dark Ages in Flushing” (N.Y. DAILY NEWS, 5/31). The WALL STREET JOURNAL’s Brian Costa wrote while the Mets “appear to be on the path to financial recovery, the path back to profitability and championship contention could still be a long one” (WALL STREET JOURNAL, 5/31). The N.Y. POST’s Terry Keenan wrote, “For all their woes, the money-losing Mets still offer great value at a time of turmoil in the financial markets.” The club is the “only National League baseball team in the biggest city in the land.” It is “virtually immune from competition -- and that monopoly status and accompanying brand name is worth a lot” (N.Y. POST, 5/29). MLB.com’s Fred Claire wrote the Mets “now find themselves with a partner who understands how good analytical decisions are made and one who has had a lifelong love affair with baseball” (MLB.com, 5/29). Smith College sports economist Andrew Zimbalist said Einhorn is “buying a distressed asset.” Zimbalist: “He’s an investor -- and he’s a risk taker” (NEWSDAY, 5/29).

GAME-CHANGER: In N.Y., Tyler Kepner wrote Wilpon’s “orchestrated publicity push, in The New Yorker and Sports Illustrated, has changed the game.” Wilpon “presented himself as in charge and in touch, sharing the passion of the fans, at least those who still come to the games.” It was “not appropriate to rip" Carolos Beltran, Jose Reyes and David Wright, but if that is “the kind of owner Wilpon wants to be, the George Steinbrenner model, then he should play the part.” Kepner: “Instead, Wilpon has gone into hiding. … It is cowardly, and it undercuts whatever good will he hoped his candor would achieve with the fan base. The lack of accountability is galling” (N.Y. TIMES, 5/28). In New Jersey, Steve Popper wrote the Mets for a week “put out Wilpon as the face and the voice of the organization.” But now with “every ticket they’d like to sell, with every fan they’d like to attract, they have to hope that voice can be cast aside and silenced.” Popper: “They have to hope no one was listening to Fred Wilpon” (Bergen RECORD, 5/29). In N.Y., William Rhoden wrote Wilpon’s “legacy now hangs by the slender thread of unresolved legal and financial issues that could take away the true love of his life: his baseball team” (N.Y. TIMES, 5/29).

COOL RECEPTION: In N.Y., Josh Kosman noted a “unique fan-backed plan to bail out the money-losing Mets got a cool reception" from MLB. A group of "wheelers and dealers from investment bank Tritaurian Capital concocted a plan to buy a minority stake" in the Mets from Wilpon "partly by selling shares priced at $999 each to thousands of Mets fans, and also by raising money from institutional investors." Sources said that the BuytheMets group "submitted a bid for the Mets, but MLB -- which must approve any investor who buys more than 10 percent of the team -- was less than thrilled by the idea of the team selling a significant stake to a group that included thousands of investors" (N.Y. POST, 5/31). 
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