Curveball for Cubs bidders

Curveball for Cubs bidders
By Gregory Meyer
Chicago Business
Published: Oct. 08, 2007

The effort to sell the Chicago Cubs has slowed to a crawl as the team’s owner brainstorms ways to reap maximum cash from its pinstriped asset.

Despite Tribune Co.’s official line that the Cubs will be sold in the fourth quarter, the team looks likely to stay in Tribune hands well into next year — possibly through opening day. That means a new owner will have to manage a team with a roster assembled by corporate brass long maligned, but recently cheered, for payroll decisions.

The slowdown has mystified bidders, who months ago submitted applications required by Major League Baseball, but since have heard little. “It’s maddening,” says an adviser to one bidding group who, like most involved with the sale, requested anonymity. Offering documents won’t be ready for weeks, a source familiar with Tribune’s planning says.

But Tribune is in no hurry as it decides whether to sell the team, Wrigley Field and other assets in one piece or individually.

“There’s no hard deadline, and I don’t think that the interest in this asset is going to dwindle,” says the person familiar with the planning.

“The groups that you’ve heard publicly that are interested in this deal, none of them have said, nor do I expect they will say, ‘If I can’t own it by April 1, 2008, I’m taking my money and I’m going home.’ ”

If offering documents don’t go out until next month, it’s unlikely the team will be sold until spring, says Michael Rapkoch, president of Sports Value Consulting LLC in Dallas, who is not involved in the sale.

Tribune is going private in an $8.2-billion buyout led by Chicago billionaire Sam Zell. The deal — announced April 2, the Cubs’ 2007 opening day — hinges on the sale of the Cubs and Tribune’s 25% stake in cable channel Comcast SportsNet Chicago. A Tribune spokesman says the fourth-quarter Cubs sale date hasn’t changed.

The team, the cable stake, and Wrigley Field and affiliated real estate could be shopped separately, the person familiar with the planning says. Such a move could lure new bidders daunted by the price tag for the whole package, estimated at $600 million to $1 billion.

For instance, Comcast SportsNet might attract buyers who don’t want to own a baseball team. The regional cable network is co-owned by Tribune, the Chicago Blackhawks, the Chicago Bulls, the Chicago White Sox and Philadelphia-based Comcast Corp. The other partners would have first dibs if Tribune relinquishes its stake, but regional sports networks elsewhere have attracted interest from outside the sports world.

The person familiar with the planning projects the sum of the parts could yield a 20% to 50% premium over selling the assets together. “It changes the calculus,” this person says.

“I’m not sure how you’re going to get 20% to 50% more,” Mr. Rapkoch says. “Potentially, you can get more value if you split up the regional sports network and kept the team and stadium together.”

Splitting the Cubs and Wrigley is unwise, an investment banker not involved in the sale says.

“It’s a much more attractive asset if the stadium is with the team,” says Jeff Phillips, managing director at Stout Risius Ross Inc. in Virginia.

Still, splitting up the assets could create new competition for bidding groups thought to have the upper hand, including one led by Chicago private-equity executive John Canning Jr., a friend of MLB Commissioner Bud Selig. Mr. Canning didn’t return calls.

With almost $13 billion in debt after going private, Tribune will be under pressure to sell. But the first payment on its buyout debt doesn’t come due until December 2008. Last week, it announced the receipt of $286 million in a tax settlement, money that could lessen the load.

In the meantime, Tribune is exploring ways to create new revenue streams to help fund the Cubs’ player payroll, which was a team record $110 million this year.

“We want to raise revenue so we can continue to put a winning product on the field and do everything we can to enhance Wrigley Field and to make a long-term commitment to this ballpark,” Cubs President John McDonough said in a recent interview. He declines to discuss the sale.

©2007 by Crain Communications Inc.

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