Mets-Einhorn deal may not be a solution
The Mets announced Thursday a tentative deal with a minority stakeholder -- hedge-fund tycoon David Einhorn -- but doubts lingered whether his $200 million infusion would solve the team's longer-term money troubles and let the current owners stay in control.
The surprise favored bidder has been a Mets fan since childhood and is a well-known and outspoken Wall Street figure and accomplished poker player. Einhorn, 42, portrayed the investment as a dream come true and a potentially "fantastic life experience."
"This is just something of great personal interest," said Einhorn, a New Jersey native who said he rooted for the Mets until his family moved to Milwaukee when he was 7. "I'm very excited to have this life experience."
In a conference call Thursday, Einhorn offered few details of his agreement with the Mets' financially beleaguered principal owners, Fred Wilpon and Saul Katz -- in part because it was still being negotiated and won't be completed for at least a month.
A source familiar with the negotiations said Einhorn's $200 million investment would get him more than 25 percent but less than 49 percent of the Mets, which Forbes Magazine estimates is worth $747 million. Einhorn said it would not include the Mets' profitable cable network, SNY.
Einhorn would not take questions about the giant financial threat on the Mets' horizon: a bankruptcy court lawsuit trying to force Wilpon and Katz to pay as much as $1 billion to settle claims stemming from the Bernard Madoff Ponzi scheme.
They and their real estate company, Sterling Equities, invested as much as $700 million with Madoff and extracted about $300 million in profits, according to the victims' bankruptcy trustee, Irving Picard. He charges that Wilpon and Katz knew or should have known the investment scheme was fraudulent, while Sterling accuses Picard of fabricating charges. Former Gov. Mario Cuomo is trying to mediate a settlement.
"I think, sadly, the Picard situation is the greatest threat to the Wilpons' continued ownership of the Mets," said Robert Boland, a professor of sports business at New York University. "Anything that buys time for the Wilpons," he said, "is very helpful to them. . . . In the short term this has to be considered good news."
Michael Cramer, a former president of the Texas Rangers and now director of the Texas Program in Sports and Media at the University of Texas, said it's "impossible to know" if Wilpon and Katz can maintain control of the team until the Madoff case is concluded.
But Andrew Zimbalist, a sports business expert at Smith College in Massachusetts, said Einhorn's investment would boost the Wilpons' odds of retaining the team by easing near-term financial pressure. "It's 200 million of fresh cash," he said.
In an interview in Sports Illustrated before the agreement was announced, Wilpon said $25 million from an investor would go to pay off an emergency loan last fall from Major League Baseball, $75 million to reduce other debt and $100 million to cover operating costs.
Still, should Wilpon and Katz fail in the showdown with Picard, they may be forced to sell the team -- and Einhorn would have a good shot to take over, said the source familiar with the deal.
"That's totally speculative, but obviously he's got a seat at the table," the source said. As for whether Einhorn would have a voice in operations, the source said: "He owns a big piece of the team, he's going to be talking to [ownership] every day about the team."
For his part, Einhorn said Wilpon and Katz would control the team and he declined to discuss any future sale of the team. "This is a minority investment," he said. "I don't expect to have control over [operations]."
Einhorn, as president of his $7 billion hedge fund, Greenlight Capital, has rarely been a silent partner. A day before the Mets announcement, Einhorn called for the resignation of Steve Ballmer, chief executive of Microsoft, in which Greenlight has a $230 million stake.
Einhorn, who lives in Westchester, drew a distinction between Greenlight investments and his interest in the Mets. "It's not a professional investment," he said. "It's a personal investment. I expect to work with the Wilpons . . . on developments going forward."
Einhorn's name had not come up as a potential bidder before the deal was announced. "The reason nobody knew we were involved until now is we didn't tell anybody," he said.
If the deal goes through -- Major League Baseball must approve it -- it would be the first change in ownership for the 49-year-old National League franchise since 2002, when Wilpon bought out publishing magnate Nelson Doubleday's half of the team. They had been co-owners since 1980.
An MLB spokesman declined to comment.
The announcement came toward the end of a difficult week for the Mets, after Wilpon was quoted in the New Yorker magazine denigrating his team and three star players.
The club has also been dogged by reported plans to slash its payroll next year and depressed attendance. Wilpon told Sports Illustrated the team may lose $70 million this year.
After nearly reaching the World Series in 2006, the Mets have not made the playoffs since and are under .500 this year.
Considering the team's recent history, reporters repeatedly asked Einhorn why he would invest in the Mets and what he expected to gain.
"This will be a long-term bet," said Einhorn. "I think the Mets are going to point in a very good direction."
With Steven Marcus and Anthony M. DeStefano
There are three steps remaining before David Einhorn is officially approved as a Mets minority shareholder.
1. STRIKE THE DEAL
The Mets say they are in "exclusive negotiations" with Einhorn. They must come to final terms on what Einhorn receives for his $200 million investment. The Mets say they expect this to be completed by the end of next month.
2. BACKGROUND CHECK
The Mets must then send Einhorn's financial data and other supporting information to Major League Baseball's commissioner's office for additional vetting and approval, according to a league spokesman. Major League Baseball investigators will also put Einhorn through a background search. The process could take two or three weeks.
3. COMMISH'S OK
A minority share sale does not have to be approved by the league's other 29 owners, according to Major League Baseball rules. Therefore it will be up to Major League Baseball commissioner Bud Selig to place the final stamp of approval on Einhorn before the deal becomes official.
-- Jim Baumbach