David Einhorn, the hedge-fund manager who offered $200 million for a minority stake in the New York Mets, may have a chance to become majority owner in three years.
Einhorn, president of Greenlight Capital Inc. who is buying a one-third stake in the team, has an option to own 60 percent in three years, ESPN.com reported yesterday, citing an unidentified person familiar with the terms.
The Mets’ owners are attempting to pay off debts and resolve a $1 billion suit by the trustee representing people who lost money in the Ponzi scheme run by Bernard L. Madoff. The Mets are carrying $427 million in debt and could lose as much as $70 million this year, owner Fred Wilpon told Sports Illustrated in a story this month. The team needed an emergency loan of $25 million from MLB last November.
“This shows us the true brilliance of David Einhorn,” said Wayne McDonnell, associate professor of Sports Management at New York University, in a telephone interview. “It also tells us the Wilpons are deeper in financial distress than we thought.”
As part of the agreement with Einhorn, Wilpon and his family can block the investor from gaining the majority stake by returning Einhorn’s $200 million investment, though Einhorn would keep his 33 percent ownership, ESPN said, citing the unidentified person.
“While we have entered into an exclusive negotiating agreement with Mr. Einhorn, there is uninformed speculation regarding terms of a potential deal,” the Mets said in a statement. “The details of the actual negotiations are strictly confidential.”
Stephen Greenberg of Allen & Co. LLC, who was hired by the Mets to handle the sale, declined to discuss the deal.
“I never comment on aspects of any transaction that are covered by binding Non-Disclosure Agreements,” he said in an e-mail.
New York businessman Mike Repole, who co-founded Glaceau Vitaminwater before it was sold to Coca-Cola Co. for $4.1 billion in 2007, inquired about buying the Mets stake until he discovered he would have no say in operations.
“If there is a path to majority ownership or repayment of the $200 million, the deal makes more sense,” said Repole in an e-mail. “David obviously seems and is a sharp businessman. He wouldn’t get to where he was at such a young age.”
The Mets are worth $858 million, placing them third in baseball after the Yankees ($1.6 billion) and Boston Red Sox ($870 million), Forbes magazine said in April. On that basis, a 33 percent stake would be worth about $283 million.
Einhorn has reached a point in his career where he is looking for a new challenge, McDonnell said.
No Greater Challenge
“There is no greater challenge than the Mets,” McDonnell said. “He has the business acumen and passion to right the ship. For anyone but David Einhorn, $200 million would be a lot of money, but for him, it’s not going to break the bank and it would be worth the risk. In three to five years, the Mets could be an attractive asset.”
McDonnell doubts that the Wilpons’ financial situation will change enough during the next three years so that they can buy out Einhorn.
“The stars are aligning perfectly for Mets’ fans,” McDonnell said.
Repole, whose thoroughbred horseracing stable colors are the Mets’ orange and blue, is cheering for a better team.
“I hope as a diehard Mets fan they plan on putting a better product on the field, improve the organization on all levels and begin to finally make some smart business moves and be less critical of superstars like David Wright and take more accountability and ownership in their numerous and consistent mistakes,” he said.
Einhorn didn’t respond to an e-mail seeking comment.