Today’s deadline to submit initial bids for the Los Angeles Dodgers may bring a record price for a professional baseball team as a result of a process that Major League Baseball lawyers said could set an unwelcome precedent.
The bankrupt team and owner Frank McCourt won concessions from MLB, some of which are secret, that reduce the influence Baseball Commissioner Bud Selig can wield over the sale process. Selig’s office was so concerned about some of the terms that MLB lawyers insisted they remain confidential.
At least one of the public terms, in which MLB agreed to pre-approve bidders, will have a material, positive effect on the auction, said bankruptcy attorney Bryan Krakauer, of the law firm Sidley Austin LLP (1119L), in an interview.
“Just having an expeditious approval process from MLB will aid the sale and it may improve the price,” said Krakauer, who helped design the sale of the Chicago Cubs baseball team for an MLB record of $845 million.
The concessions from Selig may encourage future buyers to demand similar terms, because they are designed to ensure the highest bid wins, said Marc Ganis, president of Chicago-based industry consultant Sportscorp Ltd., in an interview.
The terms, both the public and the confidential, have encouraged more bidders to participate, he said. The bids will not be made public.
“It adds certainty to the process and it defines that this will be decided based on how much somebody is willing to pay rather than the subjective criteria that baseball has been accused of applying in the past,” Ganis said.
Friends of Bud
“It avoids the ‘Friends of Bud’ allegation,’” Ganis said, referring to claims that Selig has used his influence to ensure that favored bidders win over competitors who may have offered more.
The Dodgers may sell for $1 billion or more, the team said in a court filing last year.
Major League Baseball acknowledged in court papers that it is concerned about its deal with McCourt setting a precedent for future bidders.
“If released to the public, future purchasers of other MLB clubs as well as other parties could attempt to use it to Major League Baseball’s detriment,” MLB said in a Jan. 9 court filing.
Baseball officials said the Dodgers’ sale process, and the special rules that govern it, are unlikely to be repeated, especially if the results don’t turn out as well as MLB would like.
“We view this as kind of a one-time deal,” Robert Manfred Jr., MLB executive vice president of labor and human resources, said. “We made what we regard to be relatively limited alternations of our normal process. We don’t think it will be a detriment to baseball.”
In addition to pre-approving bidders, MLB agreed to let a retired Delaware federal judge decide any disputes about key aspects of the sale, including who is allowed to bid.
Under a normal sale process, a team owner finds a potential purchaser, and afterward asks MLB to approve the buyer, the price and the terms. Details about the process governing that approval are normally kept secret, even from the buyer.
With the Dodgers, Major League Baseball will, for the first time, let bidders know how it will approve or reject them, according to court documents.
“MLB has agreed to other specific confidential procedures regarding the sale of the team and matters relating to MLB approval of prospective purchasers,” the Dodgers said in a court filing last month. Those procedures can be reviewed by bidders who sign a confidentiality agreement.
The team’s most valuable asset -- its future telecast rights -- are also covered by special terms. MLB agreed to specify how it will apply its rules for approving telecast agreements. That will help bidders factor in the value of those rights when putting together their offers, Dodgers’ attorneys have said in court.
Potential bidders for the team include Rick Caruso, the Los Angeles real estate developer who is working with former Dodgers and New York Yankees manager Joe Torre; hedge-fund manager Steve Cohen of SAC Capital Advisors LLC in Stamford, Connecticut; and Mark Walter, chief executive officer of Guggenheim Partners LLC in New York, who counts Magic Johnson, the former Los Angeles Lakers player and a basketball Hall of Famer, among his partners.
The Dodgers filed a plan Jan. 20 to exit bankruptcy by April 30 and pay all debt after concluding the auction. Dodgers HoldCo LLC last month reported long-term liabilities of $643.9 million as of June 30. Debt owed to non-affiliated creditors is $573 million, the Dodgers said in a disclosure statement for the team’s reorganization plan.
Blue LandCo LLC owns the land and parking lots surrounding Dodger Stadium. McCourt may opt to keep that land instead of selling it, under the agreement with MLB.
To emerge from bankruptcy, the team must win approval for its reorganization plan from U.S. Bankruptcy Judge Kevin Gross in Wilmington, Delaware.
Since filing for bankruptcy in June, the Dodgers have fought with MLB and News Corp. (NWSA)’s Fox Sports, which televises the team’s games. To settle those disputes, McCourt agreed to sell the team and the Dodgers dropped an effort to solicit separate bids for future telecast rights.
The deadline for opening bids for the team is today and the sale must be finished by April 30.
All of the special procedures were designed to make the sale as objective as possible, the Dodgers said in court papers.
The rules make the team “confident that no potential purchaser will be arbitrarily or inappropriately rejected as a bidder,” the team said.
The case is In re Los Angeles Dodgers LLC, 11-12010, U.S. Bankruptcy Court, District of Delaware (Wilmington).
To contact the reporter on this story: Steven Church in Wilmington, Delaware, at email@example.com