Thursday, March 29, 2007
There is a very detailed, very complicated article in the LA Times today discussing the sale of Tribune Co. One paragraph deserves note because it flies in the face of the delusional fan who thinks the Trib needs the Cubs because the Cubs are a Cash Cow:
Although Zell has said he does not plan to break up Tribune, some observers believe that he might sell some properties such as the Cubs to pare debt after a buyout. The Cubs contribute little if any profit to Tribune, yet could fetch $500 million or more in a sale.
Say the Cubs are a $200 million per year business. If 20% of that revenue is available to Tribune in annual cash flow, that $40 million only represents 0.004% of the Tribune's approximately $1.1 billion annual EDITDA (earnings before interest, taxes, depreciation, and amortization).
The Cubs are a pimple on the Tribune's ample buttox. Selling them makes all the sense in the world. Don't believe anyone who says differently.
Wednesday, March 28, 2007
The Home Stretch
Come Monday, things will be fresh again in Cub Land. Sure, the baseball season starts, but Monday should also signal a new direction for the Chicago Cubs ownership. The Tribune Company is expected to make a decision on its future. That future includes lots and lots of debt. The question is, who will control that debt? Will it be Denis FitzSimons running a scaled down version of the company? Will it be Sam Zell and his employee stock ownership plan (ESOP)? Or will it be billionaires Ron Burkle and Eli Broad who really want the LA Times and not much else?
The betting here (and many places elsewhere) is that Sam Zell will be the winner.
Tribune Co., owner of the Los Angeles Times and Chicago Cubs, will probably accept real estate billionaire Sam Zell's $8 billion takeover offer by the end of the week, according to people familiar with the matter.
An agreement is likely by Tribune's self-imposed deadline of March 31, said the people, who declined to be named because no decision has been made. Zell's offer of $33 a share is 6.8 percent above yesterday's close.
So, if Sam does buy the Trib, what does that mean for our favorite baseball team? The key is, and remains, the total amount of debt.
"assuming no asset sales and both the Chandler Trust and McCormick Foundation sell their stake, we estimate pro forma leverage slightly greater than 10 times, which we do not view as a realistic capital structure for a structurally declining business," (Barclays Capital analyst Hale) Holden said.
A more realistic scenario would be a sale of the Cubs and Tribune's 31 percent stake in the Food Network, in addition to rolling over the McCormick Trust's equity stake and potentially their proceeds from the dividend, estimated at $548 million, into the LBO financing, the bank said. A sale of the cubs is valued between $450 million and $500 million and the company's stake in the Food Network is valued around $700 million to $750 million.
But, even if Sam loses out and the Trib goes with the "Self-Help" option, the Cubs are likely out from under the Trib umbrella.
The most plausible alternative structure appears to be a "self-help" option, which could include less leverage and a smaller dividend than what Zell is proposing, as well as the spin-off of Tribune's television group
If the television stations are sold, there is no reason for the Cubs to remain. There is no grand synergy for the team without the paper, TV and radio all together.
And don't let goofs tell you that the Cubs won't be sold because of the tax implications. The taxes on a sale of the Cubs at $500 million would equate to $75 million at long term capital gains rates. Additionally, if the Trib were to sell other assets for losses, or report operating losses because of increased interest expense, a CPA friend informs me that the gains for the Cubs would be offset. The Cubs could be sold without any tax consequence whatsover because of the overall financial situation of the company.
This story is nearly 18 months old. It may be over in the next 100 hours.
Tuesday, March 27, 2007
The New York Yankees are in trouble:
Six runs were already in for the Tigers on Sunday when Todd Pratt took a seat next to starting pitcher Jeff Karstens, trying to figure out how to handle the next turn of Detroit's potent lineup.
Before Pratt could get into specific details for Sean Casey, Ivan Rodriguez and Brandon Inge in the third inning, Karstens interrupted his catcher. The Yankees now had much larger problems to contend with.
"Man, I'm hurting," Karstens told Pratt, pointing to his stiff right elbow.
This is the THIRD Yankee starter to have health issues. First, Andy Pettitte spent a week on the side with back spasms. Then, Chien-Ming Wang was diagnosed with a Grade 1 strain of his right hamstring. Now, Karstens.
The Yankees need a starter. Badly.
The Cubs may be able to help them. Why? Wade Miller is pitching lights out.
That means, the Cubs may have an extra pitcher. No, not Wade.
Now, I'm not going to suggest that Prior could be in some sort of Alex Rodriguez deal. Hell, right now they might not be able to get Robert Rodriguez to direct a remake of "The Boys of Zimmer" in exchange for Prior.
But, if Prior is healthy next week, you call the Yankees and make a deal for a high-ceiling prospect. That deal is possible.
Time to make Mark Prior valuable to the Cubs again. It can happen in a Yankee uniform.
Monday, March 26, 2007
No Room for Pie
It's been announced that Felix Pie has been sent to AAA Iowa to start the season. While this is a good strategic move for the organization, it means that there has been failure in the front office in the short run.
The Cube made it very clear that they did not want to start the season with Jacque Jones as their starting right fielder. Given how many good stories there were this off-season and pre-season (see: Alfonso Soriano, Ryan Theriot, Derrek Lee's health, Lou Piniella's new attitude, etc.), the Cubs seemed to go out of their way to let us know that Jacque wanted to be somewhere else.
That means that they really wanted Pie in either center or right.
That Pie is headed for Sec Taylor (and a date with the Rally Carp?), that can only mean that Jim Hendry has failed to trade a 20+ homer guy with a (now) reasonable contract.
Now, maybe they are only sending Pie down until May to wring an extra year out of him until free agency. And maybe Jacque will go away as soon as an AL team suffers an injury.
But it sure looks like Jim Hendry's best laid plans went oft awry.
There will be a short pause while everyone realizes that this is a recording.
Thursday, March 22, 2007
A Daryle Ward Grand Slam Led To This?
Fark would tag this, "Florida":
Police arrested St. Louis Cardinals manager Tony La Russa on a charge of driving under the influence of alcohol, a misdemeanor, after he was found sleeping at a green light in his running Ford SUV about midnight today at Frederick Small Boulevard and Military Trail.
Police grew suspicious when the SUV was stopped at a light that went through two cycles of green and a driver behind it had to go around, police said.
Police found La Russa slumped over in the driver's seat of the running SUV, which was in drive and running. La Russa had his foot on the brake and did not respond to knocks on the window, police said. He finally woke up and parked the car.
Boy, if walk off grand slams by division rivals half a continent away can lead Tony to drink, what's having Kip Wells as his #2 starter going to do?
Wednesday, March 21, 2007
Vote early, vote often.
And make it for Desipio.
It seems the University of Iowa has bought some domain names:
Iowa's athletics department purchased domain rights to seven potential Web sites last December, costing the school $674.82. The domain sites are designed to protect high-profile coaches Kirk Ferentz (football), Steve Alford (men's basketball) and Lisa Bluder (women's basketball), as well as Athletics Director Gary Barta.
They include three versions of fire(insert name).com, and four versions of (insert name)mustgo.com. However, the rights to firestevealford.com were unavailable when the department made the purchase.
Gee. The Steve Alford rights were taken? I guess they don't want people linking to www.firestevealford.com. I'm sure they don't want Alumni linking to www.firestevealford.com. And I am certain they don't want Almuni who won't donate to the university's athletic department until Steve Alford has long departed encouraging people to visit www.firestevealford.com.
Oh. It's a nice site. Go check it out.
Tuesday, March 20, 2007
Lou Piniella sounds like he’s ready for the stage in Rock Ridge. What has Lou considering changing his last name to Von Schtupp? The ongoing saga of Mark Prior and Kerry Wood.
"They played a big role here in the past, and obviously everybody's concerned," Piniella said. "I'm concerned also. But at the same time, regardless, they've got to be able to help you."
All signs point to these two men starting the year on the DL. Again.
What’s mildly interesting about this whole situation playing out again is the lack of reaction from Cub fans compared to the professional media. It sure seems like most fans have moved on while the media continues to focus on these two guys.
The reason for that goes to this offseason. This winter, the Cubs actually made some good moves. That made the roster pretty much a lock before the team reported to Arizona. Sure, you can get caught up in the minutiae of the Rocky Cherry versus Michael Weurtz battle for the 12th pitching spot, but that won’t have a huge bearing on where the team will go in 2007.
With the roster set, with Lou having a firm hand on the tiller, and with John McDonough still interim, there’s not much to report on this team. That’s a big reason why this site has been dark of late – there’s really not much to talk about unless you want to try to create interest out of nothing.
So, where do guys who get paid by the column inch find something to write about? They could start to analyze the growing crisis in the outfield and how Mark DeRosa fits in with the situation. But that’s involved and requires speculation on trades, a very difficult proposition.
No, the better angle is to regurgitate the story of two guys who have been as useful as stock repurchase plans. Maybe someone will get interested. Sorry. None of us are, Lou included. In fact, I think I heard Lou singing:
I'm tired, tired of playing the game. Ain't it a freakin' shame. I'm so...let's face it. Everything below the neck is ka-put.
Friday, March 16, 2007
The Wall Street Journal had the following report on Page B3 today:
"(Tribune Company) is still likely to press ahead with the so-called self-help restrucutring, which likely will involve taking on debt to pay a dividend to shareholders, spinning off its TV station gropu and selling the Chicago Cubs baseball team, said (people familiar to the matter)."
When blind-quoted insiders are calling this "likely," it's nearly a done deal.
The money here is that the Cubs are under new ownership before December 31, 2007.
Thursday, March 15, 2007
While I'm not formally enetered in a pool anywhere, this goes up to record, for posterity, how I picked the 2007 Men's NCAA Basketball Tournament. My methodolgy?
Guess. Guess. Guess.
Tuesday, March 13, 2007
As readers of this blog will know, billionaire Sam Zell is in talks to buy the Tribune Company and its associated assets (read: the Chicago Cubs). Zell does have a problem in owning the Cubs. It's that he owns a part of the Chicago White Sox as well.
Clearly, MLB would not allow Zell to own pieces of both clubs. That's where the Wall Street Journal starts asking questions:
Now Zell already is part owner of the cross-town rival White Sox and Major League Baseball rules prohibit ownership stakes in more than one team. So, we leave it to our readers, using the financials vs. heartache metric, in the event Zell were to buy Tribune, which team should he sell off?
The guess here is that Zells sells his interest in the Cubs because he’s already tied up with Jerry Reisdorf though the Sox AND Bulls.
Anyone else care to guess?
Monday, March 12, 2007
Left Wing Cubs
Hidden in the Sun Times today was this little nugget:
Look for right fielder Jacque Jones to get his first game in center field as the Cactus League schedule hits its midpoint and the Cubs start taking a closer look at the Alfonso Soriano experiment in center.
See, the Cubs know that Soriano has no business playing center. They really want him to play right field so the outfield can have Soriano-Pie-Murton/Floyd from right to left and trade Jacque Jones. Unfortunately, the Cubs are afraid that Soriano can't play right, either.
The problem really is that the team has three left fielders, a rookie center fielder, and a right fielder they'd love to dump (Note: Has anyone noticed that Jacque's barely been mentioned in published reports? It's almost as if the Cubs want us to forget about Jacque).
With this announcement, it's also pretty clear that Lou Piniella wants Soriano out of center. That means a defensive train wreck with Jacque, or a trade and Pie time.
Note to management: Glad to oblige.
Thursday, March 08, 2007
Time Out Chicago magazine has a great list of great Chicago lists. The favorite?
Top Five Wiener's Circle Obscenities.
#2 is just wonderful.
Wednesday, March 07, 2007
Playing Catch Up
So many things to discuss and so little time to scribble:
Days of Our Bears: Thomas Jones gets what he wants. Jerry Angelo gets what he wants for him. Lance Briggs gets what he doesn’t want. Thomas Jones was a nice running back, but he’s not the kind of guy you cry over losing and he’s certainly not the kind of guy you get giddy over getting (Mike Greenberg). Yes, he was only the second running back rush for more that 1,300 yards in Bear history. But to go as far as David Haugh did in the Tribune yesterday calling him “the Bears' best running back since Walter Payton” is just plain wrong. One Neal Anderson still holds that title. Neal was faster, a better runner, and a more accomplished receiver than Jones ever was or will ever be. Jones is also 28 and was looking for big money. Angelo did the right thing for both Jones and the Bears by unloading him
The only downside to the Jones trade is that the Bears only upgraded their draft slot. Couldn’t they have negotiated for a pick outright? With needs on this team ranging from QB to multiple WR, to OL, to LB, to possibly even RB, an outright 3rd round pick seems worth more than moving up 26 slots.
Tribune Zell-ing Out: The hot rumor du jour is that Sam Zell, fresh off converting billions in REIT investments into cold cash has now emerged as a major player to buy the Tribune Company. As a current investor in the White Sox and Bulls, does that give Zell a conflict of interest? Or, as a local guy, would he have the civic integrity to try to run the Cubs as a public trust instead of a profit center? And what about Naomi? This 18 month old story should begin moving again in the next few weeks. Stay tuned.
Prior Performance Predicts Future Performance: While Kerry Wood was doing his first piece of auditioning for the Cubs closer job (soon to be vacated by Ryan Dempster), Mark Prior was doing his best impression of post-shoulder trouble Rick Sutcliffe. It has been speculated here that Mark Prior’s career may have begun a downward spiral the day he collided with Marcus Giles in August 2003. Prior came back from that boffo bit of baserunning to pitch in September and October as well as any pitcher since Orel Hirschiser in 1988. Based on published reports in 2004, 2005 and 2006, we know that Prior’s Achilles was hurt during that time. It is speculated here that Prior overthrew his arm to compensate for the weak leg. And that is what has led to his reduced velocity, the “genetic weakness” in his shoulder and his general ineffectiveness since 2003.
While Lou Piniella currently claims Mark Prior is healthy, there is no reason to believe that Lou is lying. One doubts, however, that a healthy Mark Prior is undamaged.
John McDonough Keeps Using Those Words: Cubs Interim-Until-The-Sale-President gave an interview to the collected media yesterday. The highlights:
1) John continues to use four words that Cub fans love to hear, “We articulated the mission early on that the ultimate goal was to win. The ultimate goal was to win the World Series and try to initiate this dialogue where we talk about winning more often.”
John may not realize it, but he’s also bashing Andy MacPhail with those words because he’s saying “win the World Series” wasn’t said often enough under the old regime.
2) John states directly that the reason the Cubs spent $300 million this offseason is because people stopped showing up. “I saw some frightening sights at times when I would go into the stadium and see 14,000 or 15,000 people there,” said McDonough. Gee. If only people has stopped showing up 10 years ago...
3) As to if he’ll have his job much longer due to a sale, John goes with the don’t-ask-don’t-tell angle:
I don’t know. I really don’t know. If you’re the property they’re looking at, whether it’s the newspaper group, the broadcasting group or just parts by themselves, I haven’t been privy to those discussions, nor do I think I should be.
I dunno if McDonough will actually be a good team president, but says all the things you want to hear from a guy in that role.
Thursday, March 01, 2007
Arguing Over Pennies
Lovie Smith got his payday:
Smith was given a four-year extension through 2011 and Angelo a five-year extension through 2013, the Bears announced. ...
But sources estimated Smith's extension is worth $22 million in new money.
Added to his 2007 salary of $1.45 million, the five-year average of $4.69 million jumps him from the lowest-paid coach in the league into the top 10.
So, looking back to what Smith turned down a year ago, the Bears had offered approximately $12 million for years 2006 through 2009. Instead, Lovie earned $1.35 million in 2006, he gets his set $1.45 million in 2007 and then $5.5 million per year through 2011.
That means, for years 2006 through 2009, Lovie will earn $13.8 million. That means, all this arguing was about $450,000 per year -- plus two additional years worth $11 million.
Was it really worth all this haggling? Was it worth the bad press the team got? Probably not. If you are going to give a guy his money, why drag out the process? They could have given him this money a month ago and the Bears would have received hossanas for their forsight.
Then again, if it gets Carol Slezak fired for the piece of trash she wrote, maybe it was worth it.
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