Major League Baseball: Texas Ranger Sale cloaked in controversy
The Texas Rangers sale saga began in January with an announcement stating that a sale agreement had been reached. According to the agreement a group of investors led by Chuck Greenberg and Nolan Ryan (Rangers Baseball Express) would purchase the Texas Rangers. Hicks, Chairman and owner of the Texas rangers, would become a minority share holder under the agreement. Hicks wanted to retain some control of his team.
The sale, though, was not as simple as that. The Hicks group had defaulted last year on over $500 million owed to lenders. This meant that the deal couldn’t be finalized until the lenders signed off on it. The lenders, however, were not happy with the terms of the sale amid allegations that Hicks had favoured Greenberg and Ryan’s $575 million dollar offer over a more valuable offer presented by Jim Crane. Hicks resorted to drastic measures and filed for voluntary bankruptcy in an attempt to get the sale moving again in the bankruptcy courts.
When the courts heard the case they didn’t see things as Hicks had expected. To the creditor’s delight, the court upheld their claim that they reserved the right to approve or block the sale of the team in accordance with the terms of the loan documents. Then the presiding judge ruled that the Texas Ranger’s must hold an auction for the sale.
The court also ruled that the Ranger Baseball Express (RBE) was not entitled to the $15 million breakup fee that they wanted for being the favoured bidders. RBE would only receive 1.5 million as compensation if a bid higher than their $575 million comes to the table. July 22 is the deadline set by the court until which date bids would be accepted.
A serious blow was dealt to the RBE sale since $1.5 million in compensation is a relatively insignificant amount for a purchase worth more than half a billion dollars. While $15 million in compensation could have deterred bidders, $1.5 million won’t have the same effect. Hicks would be particularly distraught because the deal was lucrative for him personally. The sum of $575 million included $75 million for the stadium’s parking facilities. Those $75 million would have landed directly into Hicks’ pocket. Bidders won’t be required to acquire the parking facilities. Even in the event that a prospective bidder decides to buy the parking facilities, the amount being paid for them won’t necessarily be as high as $75 million.
As soon as the court ruled in favour of an auction, rumours began circulating in the press that Maverick’s owner, Mark Cuban was also interested in the sale. Cuban didn’t answer any questions regarding the rumours. Cuban did, however, say that he had been contacted. “I can’t say anything else”, Cuban further added only making the existing confusion, worse. A word of caution though, it still gets more confusing.
On Monday the Rangers Baseball Express (buyers), filed a suit against the Texas Rangers Baseball Partners (sellers) alleging that the TRBP was in a violation of the Asset Purchase Agreement signed between the two groups in May.
The document filed with the courts sought “a judgment from this Court declaring that the Debtor has breached the Asset Purchase Agreement between TRBP and RBE and continues to breach such agreement by soliciting and negotiating with prospective bidders other than Plaintiff regarding the acquisition of the Purchased Assets”. In layman terms it means that after the Asset Purchase Agreement was signed, the Texas Rangers Baseball Partners could not look for any other buyer.
The RBE is asking the courts to stop the TRBP from pursuing buyers and to “consummate” the Asset Purchase Agreement. Failing that, the RBE alleges that the breach of the APA entitles them to “to recover compensatory damages that, at the minimum, are the difference between the contract price and fair market value of the Purchased Assets”.
If the court sides with the Rangers Baseball Express then even if and when a higher bidder for the Texas Rangers is found, the difference between the new bid and the one RBE made would be paid to the RBE and not the debtors. The debtors have been pursuing an auction for the Texas Rangers solely because they believed they could get more value for the sale. If the court upholds RBE’s claim then it would be pointless for the debtors to seek another buyer and the sale could finally go through.
The case never lacked drama and recently there has been more of it. The court-appointed Chief Restructuring Officer (CRO), William Snyder, alleged that the Texas Rangers are working in tandem with the group led by Ryan and Greenberg. What the allegation means is that the RBE and TRBP were working together in a case one group filed against the other. The aim of the cooperation is to stop the bidding process and make sure that RBE has no one to compete against for the purchase of The Texas Rangers. Conspiracy you say? Maybe, we can’t know that but it’s certainly a good indication that more drama is to follow before the dust settles.
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