SBD/September 2, 2011/Franchises

Mets Looking To Sell Smaller Stakes After Einhorn's Investment Falls Through

Einhorn said that the Mets "jerked him around starting in July"
The Mets will "try to sell smaller minority stakes, in the range of $20 million apiece, to raise the $200 million the team had hoped to receive" from David Einhorn, according to sources cited by Zuckerman, Futterman & Costa of the WALL STREET JOURNAL. Negotiations with Einhorn fell through Thursday, and a source said that Mets Owners the Wilpons and Saul Katz will "reach out first to friends and family" regarding potential investment in the team. The Mets are "facing losses of roughly $70 million this year," but their willingness to end negotiations with Einhorn "may be a sign of renewed confidence within the organization over its finances." The Wilpons and Katz on Thursday said, "Ownership has provided additional capital to cover all 2011 losses and is moving forward with the necessary resources to continue to operate the franchise" (WALL STREET JOURNAL, 9/2). A Mets source emphasized that any new investors will have "no path to ownership" (NEWSDAY, 9/2). In N.Y., DeCambre & Kosman report the Wilpons and Katz "either have reached out to or are planning to reach out to a number of prospective investors," including Skybridge Capital Managing Partner Anthony Scaramucci, BTIG co-Founder Steve Starker and Marquis Jets co-Founder Ken Dichter. Banks, including JPMorgan, that have provided loans to MLB are "not expected to balk at the Mets' latest move" (N.Y. POST, 9/2). Newsday's David Lennon said, "I think the Wilpons will find other investors for this team and I think in the case of Einhorn, that was kind of a quick fix" (“Loud Mouths,” SNY, 9/1). In N.Y., Belson & Sandomir note in some ways, selling 1-2% shares of a team is "easier than trying to reach an agreement with one wealthy person or group for a 20 or 30 percent stake." Deals for "small shares of teams are more likely to win approval from Major League Baseball and from the banks, if loans are needed" (N.Y. TIMES, 9/2).

THE ROOT OF THE PROBLEM: Scaramucci, who previously expressed interest in a minority stake in the Mets, said the Wilpons and Katz "never wanted to give up control of that organization ... (and) my guess is that David wanted more than just to be a passive owner of that team say over a five or ten-year period of time." He added, "I think that's really where the strugle was" ("Strategy Session," CNBC, 9/1). In N.Y., DeCambre, Venezia & Whitehouse note the Wilpons and Katz "worried" that the proposed deal with Einhorn could eventually give him control of the team. One of the "major sticking points was a provision that would have allowed him to acquire a controlling stake in the team if he wasn't repaid his investment in five years." He said MLB Commissioner Bud Selig "assured me this should be no problem." Einhorn said that the deal he "thought was finalized in May started breaking down late last week when the Mets owners made 'extensive' last-minute changes." Einhorn added, "I didn't hear another word about it until late last week. ... I was surprised. I was very surprised." Einhorn indicated that the Mets "jerked him around starting in July, when he allowed the exclusive negotiation period to expire in good faith -- with the assumption that they were on firm footing." He said, "I received repeated assurances by the Mets' investment bankers that we had a deal" (N.Y. POST, 9/2). Fred Wilpon disputed Einhorn's assertions, saying, "We did not make any changes in the agreement or lobby against anything." In N.Y., Richard Sandomir notes talks broke down, in part, over Einhorn's "desire to be preapproved by Major League Baseball as the team's majority owner in anticipation that he might be able to buy more than 50 percent of the team in coming years." In addition, Einhorn reportedly was "seeking considerable input as a limited partner, which also may have factored in the talks' breakdown" (N.Y. TIMES, 9/2). Einhorn Thursday said further negotiations with the Wilpons would be "pointless" (, 9/1).
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