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Role of investors examined in Rangers bid
Published July 26, 2010
Ever since agreeing to buy the Texas Rangers in mid-December, Pittsburgh lawyer and minor league baseball team operator Chuck Greenberg has been the face of the embattled bid to buy the club. Along with Nolan Ryan, his public partner, team president and hall of famer, the two have been described in countless articles as the future owners of the team.
But Greenberg is investing only a few million dollars in the team, sources said, and he confirmed in bankruptcy court last week that the big money behind the bid comes from two top Dallas-Fort Worth area energy executives: Ray Davis and Bob Simpson.
“In capital-raising parlance, you are a promoter; you are being compensated for promoting this deal,” said Andy Leblanc, the attorney for the Rangers’ lenders, to Greenberg while cross-examining him last Wednesday.
Greenberg disagreed with the term “promoter” and said he would receive no promotional fee at closing if that were to occur, but he did not disagree that his equity represented a very small slice of the overall deal. There is about $140 million of equity in his proposal to buy the team.
Small equity stakes for managing directors, or “control partners” as MLB calls them, are not unheard of, though rare. Jerry Colangelo had a very small slice of the Arizona Diamondbacks but was the control partner because he put the investment group together. Colangelo sold the team in 2004.
Greenberg, through a spokesman, declined to answer questions for this story. The court last week ruled that Greenberg did not have to answer Leblanc’s question about how much money he was putting into the deal.
If, however, Greenberg is putting in $3 million, as creditor sources maintain, that would translate to about 1 percent of the team, based on his current bid.
Greenberg said during his testimony that in addition to the equity he would receive for his investment, he could earn more based on his future service as managing director and chief executive officer of the franchise.
MLB has no equity threshold requirements for a franchise’s top owner. That’s different from the NFL, which requires at least 20 percent be invested from a team’s managing director. The minimum-equity rule is designed to ensure that the managing director has deep pockets in the event of financial difficulties and to ensure that decisions are not made by committee.
There are 18 members of Greenberg’s investment group, he testified last week during the bankruptcy hearing. The hearing was called to set auction rules for the club, with Aug. 4 being confirmed as the auction date and Greenberg’s group receiving preferred bidding status.
An affidavit filed on July 15 from KPMG to the court in connection with the Rangers’ request to hire the accounting firm, listed 12 members of Greenberg’s group, with Davis and Simpson noted first and second, respectively, and Greenberg 10th. It’s unclear if there was any order to the listing even though Davis and Simpson, whom Greenberg described as the top two investors, are listed first and second. Ryan is listed ninth.
Greenberg testified he has tried to convince his investors to extend their commitment past Aug. 12, when their deal to purchase the Rangers would expire, but he said they rejected the overture. Because of that deadline, the court set Aug. 4 as the auction even though lenders said there is not enough time for other bidders to line up financing.
Whether Greenberg and Ryan win the team is still in doubt. The duo won the rights to buy the team after a contested auction in December, but lenders to the club objected and argued a higher offer existed from Jim Crane. The team filed for Chapter 11 bankruptcy protection May 24 in order to sidestep the lenders’ protests, but the court on July 15 settled on an auction.