October 20, 2020

Einhorn Could Become Principal Owner of Mets

Einhorn is expected to receive a one-third share of the Mets in return for his investment, but could gain much more. He will have the option in three years of raising his stake to 60 percent, effectively ending more than three decades of control of the team by the Wilpon family.

Fred Wilpon, the principal owner, could block a move to take over his team by repaying the $200 million invested by Einhorn. But Einhorn would then retain his one-third share of the team, essentially at no net cost, according to the person with direct knowledge of the negotiations, who spoke on the condition of anonymity because he was not authorized to publicly discuss the matter.

Steve Greenberg, the investment banker hired by the Wilpons to sell a minority stake in the Mets, declined to comment. Rob Manfred, executive vice president of Major League Baseball, also declined to discuss the deal. A spokesman for Einhorn said he had no comment. In a statement, the Mets said their exclusive negotiating agreement with Einhorn was “strictly confidential.” They later issued a second statement saying “there is uninformed speculation regarding terms of a potential deal.”

It is unclear what Einhorn would have to pay to increase his stake in the team to 60 percent in three years. Customarily, an auditor would be hired to revalue the franchise to determine the basis for negotiations over a price.

The deal now being discussed between Einhorn and the Mets does not include a stake in SNY, the team’s profitable cable television network. Einhorn said Thursday that he was not interested in the television business, unlike many other bidders for the team.

The outline of the proposed deal was first reported by ESPNNewYork.com.

Though the deal is not final and is subject to the approval of Major League Baseball, its terms underscore the vulnerability of the Wilpons, whose team is swimming in debt, bleeding cash and losing fans. Wilpon said the team could lose about $70 million this year, $20 million more than last year.

The Mets are also embroiled in a legal battle with Irving H. Picard, the trustee representing the victims of the fraud in Bernard L. Madoff’s Ponzi scheme, who is seeking $1 billion from the Wilpon family.

Einhorn, 42, is expected to seek legal indemnity from that case, which is being mediated by Mario M. Cuomo, the former governor of New York. Einhorn is also likely to clarify what role he would have if the Mets were forced to sell the club.

The potential agreement with Einhorn “certainly demonstrates a desperate need for immediate cash by Wilpon,” said Marc Ganis, the president of SportsCorp, an industry advisory firm. Einhorn, on the other hand, was striking a clever deal, he said.

“His downside is he receives one-third of the Mets for a three-year, $200 million loan,” Ganis said. “His upside is he would be the control owner of the Mets in three years at a reasonable valuation and only have to buy 60 percent, not 100 percent, to achieve that.”

Einhorn is president and co-founder of Greenlight Capital, a hedge fund that manages about $8 billion. His willingness to invest $200 million in a distressed team and maintain a path to majority ownership echoes a strategy he has used in amassing his fortune. He is known for buying into severely undervalued assets that have the potential to recover.

Few teams publicize the sale of minority stakes, and even fewer publicize them before the sales have been made final. Yet the Mets announced their intention to sell 20 to 25 percent of the club four months ago. Since then, the team has slumped in the standings and experienced a 10 percent decline in attendance from last year.

Wilpon was roundly criticized last week for making negative comments about his star players and for calling his team “lousy” and “snakebitten.” He also said his team was “bleeding cash.”

The announcement that the Mets were in exclusive negotiations appears to have given the upper hand to Einhorn, because it deterred other potential investors and set up an expectation that a sale would be made.

Still, Wilpon, who made his fortune in real estate, may be calculating that the team and the economy may recover in three years, which would make it easier for him to raise the cash needed to fend off a takeover. At that time, Wilpon could sell part of his stake in SNY to Einhorn, or raise cash to repay him.

In the short term, the $200 million from Einhorn is almost certain to meet the team’s most pressing needs and potentially stabilize its finances into next year. The Mets are expected to use half the money to pay back loans to banks and Major League Baseball, according to several people with direct knowledge of the team’s finances. The rest would help pay player salaries and cover other expenses.

By selling the club in pieces, Wilpon may also be trying to reduce the amount of capital-gains tax he would have to pay at any one time.

Article source: http://feeds.nytimes.com/click.phdo?i=604347e77ec460d8f91977146f92358b

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