Friday, January 23, 2009

Down The Stretch, It’s Ricketts In The Lead

Splashed everywhere is the news that the Ricketts family of Omaha has won the bidding to be the next owner of the Chicago Cubs. That’s not entirely accurate. What the Ricketts family has won, with Tom Ricketts as the point person for the family, is the exclusive negotiating rights to close on a purchase. There are several hurdles that still need to be cleared before a sale can actually close.

First, there seems to remain the hurdle of financing. From the Tribune article on the sale:

The appeal of the Ricketts bid was that it featured more cash up front than the other bids, promising roughly 50 percent in equity and the rest of the $900 million financed with debt, a source said. Sources said the structure was favored by Tribune Co. and creditors since it meant more cash in the bank on closing day, money that no longer would be at risk.

That's really kind of shocking that the financing isn’t nailed down given how long all the bidders have had to get credit lined up. In these times, walking into a deal and only bringing 50% of your offer to the table as locked down is a good way to see your deal get blown up.

(This also confirms Mark Cuban's position in all this. It certainly appears that he was willing to go with a 100% equity offer - cash up front with no financing contingency.)

The second place this can get blown up is in the courts. Yes, the Cubs are not part of the bankruptcy filing. Doesn’t matter. There are over 1,000 Tribune creditors who need the Trib to get that $900 million in cash to pay off delinquent debts. There are probably no grounds for a judge to reject the Ricketts bid outright. But there’s still a chance the judge could approve the bid subject to a final round of open bidding. Given that the Ricketts bid still seems to need $450 million in debt, if a new bidder were to step forward with a larger cash offer, creditors could push a judge to accept the higher cash-up-front bid. If the Trib owes you $100,000 and they offer you Option A of $50,000 now and maybe $50,000 in 6 months but no guarantee of that, or Option B of $75,000 now and that's it, which one do you take?

As to Tom Ricketts himself, how he would be as a managing partner remains to be seen. What you want in a deep pockets owner is a guy with the massive ego that wants to win, but without the radical passion of an emotionally invested fan. A combination of ego and emotion yields Dan Snyder of the Washington Redskins. Sure, Snyder throws money around at the best free agents, but his rabid fandom interferes with a the organization’s ability to develop a long term strategy for growth and development of on-field talent.

The Tribune as owners had neither ego nor passion. They were purely profit driven. And that's a big reason why the Cubs never won under their ownership.

Tom Ricketts clearly has a Cub fan's passion. The question is if he can keep it in check and allow his new president and general manager to truly build an organization that the Cubs haven’t had since the Trib fired Dallas Green? Will his ego to win heighten his passion or will intelligence rule? We shall see.

But first, over to you, judge.

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