Wilpon Family May Sell Up to 25% of New York Mets Due to Madoff Lawsuit
Fred and Jeff Wilpon said they may sell up to 25 percent of the New York Mets because of a lawsuit in the Bernard L. Madoff case, after insisting for months the baseball club was safe from the biggest Ponzi scheme in U.S. history.
The father and son owners said yesterday they have hired Steve Greenberg, a managing director at Allen & Co., as their adviser to address “the air of uncertainty” created by the lawsuit. On a conference call, the Wilpons said they would remain principal owners.
“I want to emphasize what we are discussing today has not and will not affect the Mets’ day-to-day operations and control,” Fred Wilpon, 74, said on the call. “Let me stress, at the end of the day, we may or may not do anything. We are exploring options.”
The Mets, born in Major League Baseball’s 1962 expansion, have won two World Series championships, the last in 1986, compared with the record 27 by the New York Yankees. With one of the biggest payrolls and highest valuations in baseball last year, they finished 79-83 in front of dwindling crowds at a 2-year-old ballpark and missed the playoffs for the fourth straight season before firing their manager and general manager.
“They’re paying for their new stadium, and the team did not do as well in revenue last year,” said Andrew Zimbalist, professor of economics at Smith College and an author of books on the sports industry. “They also have one of the highest payrolls, so the Wilpons have been bleeding a bit on the Mets side as well.”
The Mets were the third-highest-valued team in the major leagues at $858 million, behind the Yankees ($1.6 billion) and Boston Red Sox ($870 million), Forbes magazine said in April 2010. It said the Mets’ value had dropped 6 percent from 2009, with $268 million in revenue and operating income of $26.2 million.
A sale of 20 percent to 25 percent, as outlined by the Wilpons, would be worth $171.6 million to $214.5 million, based on the Forbes figures. Greenberg said the market for the team “has never been stronger.”
“The proposition we are putting forward today is exactly the proposition that one might put forward if one were acquiring the team today,” Greenberg said on the conference call. “This is a prudent approach to team ownership and the financial structure irrespective to what else is happening in the world.”
The Wilpons said any sale wouldn’t involve Citi Field, their home stadium, or SportsNet New York, their regional sports network. That unit was created by Sterling Entertainment Enterprises, Time Warner Inc. and Comcast Corp. in 2006, according to the network’s website.
Citi Field, built with $547.4 million in bonds sold in 2006, showed a profit of $98.7 million in 2009, its first season.
After yesterday’s announcement, $30,000 of the 5 percent bonds due in January 2046 and backed by Queens Ballpark Co. LLC traded at lower prices than earlier this week.
The average price in three trades of $10,000 each was 70.95 to yield 7.31 percent, compared with a price of 103.5 to yield 4.57 percent when the bonds sold in August 2006. As recently as Jan. 26, the bonds traded among securities firms at 75.56 to yield 6.85 percent.
The club’s payroll last season was $134.4 million, fifth highest among the 30 major league teams. The Mets finished in fourth place in the five-team National League East, while the Yankees made the American League playoffs for the 15th time in 16 years. The Mets made the postseason three times in that span.
Marc Ganis, president of Chicago-based Sportscorp Ltd., said buying into the team might appeal to “people who have a lot of cash and want to say they own a piece of the Mets and be treated like an owner.”
“But those people aren’t going to be investing hundreds of millions,” Ganis said in a telephone interview. “Those types of investments are typically much smaller.”
Sterling Equities Inc., the owner of the Mets, Mets LP and Fred and Jeff Wilpon were sued by the trustee liquidating the Madoff business, Irving Picard, on Dec. 7 in U.S. Bankruptcy Court in Manhattan.
Picard, in court papers, said that Mets LP had two accounts with Madoff that involved taking out $47.8 million more than the Wilpons invested. Picard has followed the line that net winners are subject to lawsuits to claw back any surplus over their original principal. Picard has sued hundreds of Madoff investors who withdrew more from their accounts than they originally invested.
The suit, which was filed under seal, names dozens of people and entities related to Sterling Equities Inc. and the Wilpon family. It’s unclear how much profit they may have taken from the Madoff fraud or what Picard claims they must pay back.
The New York Times, citing two lawyers involved in the case, said Picard is seeking more than $300 million from the owners of the Mets. The lawyers were not identified.
“To address the air of uncertainty created by this lawsuit, and to provide additional assurance that the New York Mets will continue to have the necessary resources to fully compete and win, we are looking at a number of potential options,” the Wilpons said in a statement that was e-mailed to “Dear Mets Fans.”
Madoff Pleaded Guilty
Madoff, 72, pleaded guilty to masterminding the fraud in March 2009 and is serving a 150-year prison sentence. At the time of his arrest, his account statements reflected 4,900 accounts with $65 billion in nonexistent investments. Investors lost about $20 billion in principal.
In an e-mailed statement, Sterling said at the time that it and its co-defendants are in settlement negotiations with Picard. Picard confirmed the talks in a statement.
“The New York Mets will have all the necessary financial and operational resources to fully compete and win,” Gregory Nero, general counsel for Sterling, said in the group’s statement. “That is our commitment to our fans.”
The Mets fired General Manager Omar Minaya and field manager Jerry Manuel just after the season ended in October, bringing in Sandy Alderson to head the front office and Terry Collins to run the team in the dugout.
Alderson in Charge
An Ivy League-educated ex-Marine, Alderson said he would seek flexibility in the team’s payroll and improvement in the minor-league player development system, rather than turn to signing free agents.
In November, the Mets announced they were cutting ticket prices by an average of 14 percent at Citi Field, their $850 million ballpark that opened in 2009. The team drew 2.6 million fans last season, down 600,000 from the previous year.
At a news conference to announce the dismissals of Minaya and Manuel in October, Fred Wilpon said the Mets “absolutely” have the financial resources to pursue free agents and field a winning team.
Later that day, in an interview on New York’s WFAN Radio, Jeff Wilpon said the Mets hadn’t been financially damaged by the family’s investment losses in the billion- dollar fraud scandal involving Madoff.
Zimbalist said sports consultants and economists knew better.
‘Significant Economic Returns’
“Baseball people have known about this for a long time,” he said in a telephone interview yesterday.
Zimbalist also said that a partner who joined now with a small stake might be looking at bigger things in the future.
“It is conceivable that the partnership could have significant economic returns,” he said. “It is possible that the person who joins as a minority partner now might want a majority stake later. There might be a provision of right of first refusal, which is very common, essentially saying that you can buy 30 percent today, and if the Wilpons ever decide to sell any of their ownership shares, you’ll be the first person to have an opportunity to turn to buy them.”
Fred Wilpon and Nelson Doubleday purchased the Mets for $80.8 million in 1986, after Doubleday & Co. was purchased by Bertelsmann AG. The co-owners’ relationship deteriorated and Wilpon bought Doubleday’s share of the team for $131 million in August 2002, according to the New York Times.
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