Lovable losers? Not at this sale price

Originally Published: April 2, 2007
By John Helyar | ESPN.com

While the rest of baseball celebrated the start of another season with traditional bunting and ceremonial first pitches Monday, the owners of the Chicago Cubs took a different approach. Tribune Co. marked Opening Day 2007 by firing the opening gun for a bidding scramble for its team. The media giant's announcement that it will sell the Cubs after the 2007 season almost surely will draw a raft of frenzied, moneyed buyers and a price topping $600 million.

"I think every wealthy Chicagoan who's ever gone to Wrigley Field and dreamed of owning the Cubs is going to come out of the woodwork," one investment banker said.

So at least for a day -- especially after the Cubs' Opening Day 5-1 loss in Cincinnati -- speculation on whether the team will contend for the playoffs has been supplanted by speculation on who'll contend for ownership. Jerry Colangelo, CEO of the NBA's Phoenix Suns and a Chicago native, acknowledged interest in the Cubs last fall. On Monday, he issued a carefully worded statement: "My intention is to monitor the process as it plays out during the course of the season."

Dallas Mavericks owner Mark Cuban also has expressed interest in the Cubs before, as well as in the Pittsburgh Pirates. But in February, Cuban denied he was working on a bid for the Chicago team. He did not respond to an e-mail query from ESPN.com on Monday.

Wrigley Field
AP Photo/Steve MatteoCan the team's next owner find a way to make this sign say 'Cubs win' more often?
The sale of the Cubs is a result of the Tribune Co.'s own sale to Chicago-based billionaire Sam Zell. He edged out two Los Angeles billionaires -- Ron Burkle and Eli Broad -- to buy the rest of Tribune Co. in a deal valued at $8.2 billion.

Zell has made his fortune in real estate, but it isn't Wrigley Field that interests him. It's the Tribune Co.'s 23 television stations and major newspapers, which include the Chicago Tribune, Los Angeles Times and Newsday.

Zell will wind up with an estimated $13.4 billion of debt after borrowing for the acquisition and assuming existing corporate obligations. The Tribune's sale of the Cubs will lighten that debt load.

It also makes sense to put the team on the block immediately. Major League Baseball likely would look dimly on selling a flagship franchise such as the Cubs to an owner such as Zell, who would keep them only in the short term, according to one investment banker. Better for the Tribune Co. to find a long-term buyer and divest the Cubs simultaneously with, but separate from, the parent company's sale to Zell. The company aims to close both transactions in the fourth quarter of this year.

The Cubs sale could approach or break the MLB franchise price record: $700 million, paid by the trio of John Henry, Tom Werner and Larry Lucchino for the Boston Red Sox in 2002. But that tag included the team's 80 percent ownership of New England Sports Network. The only media asset tied into the Cubs is Tribune Co.'s 25 percent ownership interest in Comcast SportsNet Chicago.

The Cubs stand to fetch top dollar both because the major league baseball economy is fat and happy these days and because … well, they're the Cubs. No matter their absence from the World Series since 1945, their 99-year World Series title drought and their subsequent lovable losers image, this is a team with a fanatic fan base, a fabled ballpark (into which the Cubs packed a record 3.2 million fans last season) and a national following thanks to the Tribune Co.'s WGN superstation.

"There will be huge interest by high-net-worth individuals," said Sal Galatioto, a New York investment banker specializing in sports transactions. "This isn't just a regional brand; it's a national brand, one of the most prestigious franchises."

Part of the allure for prospective owners is the widespread belief that better management easily could make the Cubs even more valuable. Under Tribune Co., the franchise has appreciated greatly in value -- from the $20.5 million Tribune paid for it in 1981 to the $600 million plus it could fetch in 2007 -- but generally underperformed on the field. The Cubs have made the playoffs only four times since Tribune bought the team.

Tom Begel, founder and chairman of Chicago-based TMB Industries, is one person who fits the profile of a prospective new Cubs owner. He made his fortune with this private equity firm by investing in, and turning around, troubled manufacturers. It's a skill set the lifelong Cubs fan believes he could apply to the team.

"There's not a great income stream [in baseball]," said Begel, who already has assembled an investor group, on Monday. "But look at the asset appreciation."

The Cubs' moves of the past offseason puzzled many in baseball. The team's payroll soared past $100 million with the signing of free-agent outfielder Alfonso Soriano and the re-upping of third baseman Aramis Ramirez. Soriano will make $136 million over eight years; Ramirez's contract is for $73 million over five years.

"It makes no sense that they built up their costs if they were looking to sell," one banker said.

John Helyar is a senior writer for ESPN.com and ESPN The Magazine. He previously covered the business of sports for The Wall Street Journal and Fortune magazine and is the author of "Lords of the Realm: The Real History of Baseball."

John Helyar

Sports Business
John Helyar is a senior writer for ESPN.com and ESPN The Magazine. He previously covered the business of sports for The Wall Street Journal and Fortune magazine and is the author of "Lords of the Realm: The Real History of Baseball."

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