Red Sox reach deal to sell team for record $700m
After a flurry of last-minute intrigue, a group of investors led by outgoing Florida Marlins owner John W. Henry emerged as the winning bidder last night for the Boston Red Sox, with a $700 million offer - more than double the highest price ever paid for a Major League Baseball team.
Henry’s group, which includes television producer Tom Werner, former Baltimore Orioles executive Larry Lucchino, and former US senator George Mitchell of Maine, nosed out Long Island cable television billionaire Charles F. Dolan for the chance to follow the seven-decade legacy of Yawkey family control of the Sox.
In a joint statement last night, Henry, Werner, and their colleagues said: “The Boston Red Sox represent the spirit and passion of New England. We will become active and visible members of this great community and always remember that the team belongs not to us, but to all of you.”
Executives close to the situation said Dolan actually submitted a higher bid, said to be $720 million. But after hours of discussion, Red Sox chief executive John Harrington and the team’s limited partners unanimously rejected Dolan’s bid. They cited concerns that the Cablevision Systems Corp. chairman might face a protracted fight getting the required approvals from Major League Baseball and 23 of the 30 team owners.
New York lawyer Miles Prentice, who was backed by the Quadrangle Group, a private equity firm, also reportedly submitted a bid higher than Henry’s. However, the team’s limited partners were not convinced that Prentice could win quick approval from league owners either.
Red Sox lawyer Justin P. Morreale declined to comment on what rival bidders offered. But Morreale said: “There was no bid higher than this one” from the Henry-Werner group “that was not subject to very significant contingencies that ranged from impractical to one which violated Major League Baseball rules.” He would not elaborate.
Executives close to the sale said the Henry-Werner offer included $410 million for the majority stake of the Yawkey Trust, which has its roots in the 1933 purchase of the team by Tom Yawkey, plus $250 million for the limited partners who held veto power over the deal. The assumption of $40 million in debt brought the total value to $700 million.
If, as expected, league owners approve the Henry-Werner bid when they meet next month, it could be good news for fans who hope to see the 89-year-old Fenway Park preserved. Werner’s group has outlined ambitious plans to rebuild and expand Fenway where it is rather than build a new ballpark nearby or on the South Boston waterfront.
Some last-minute drama came when a late-developing alliance between Henry and local bidders Joseph O’Donnell and Steve Karp fell apart hours before yesterday’s meeting. The alliance of the two groups reportedly had some encouragement from Major League Baseball Commissioner Bud Selig. But the two sides could not agree on who would have operating control.
Harrington said the Henry-Werner team was the `highest qualified bidding group.” He did not elaborate and refused to take questions following a brief announcement after nine hours of meeting at Fenway Park with the team’s limited-partner owners, who control a 47 percent stake in the club.
Harrington praised Henry, Werner, and their colleagues as “deeply involved and passionate about baseball, and they are committed to our team. They have the resources to continue our quest to beat the Yankees and to win a World Series.”
Werner said in an interview last night: “We are just overwhelmed by the responsibility of carrying on the Yawkey legacy. We want Red Sox fans to know that we will work to the best of our abilities to bring a world championship to Boston.”
Henry plans to move from Florida to the Boston area with his family and would be cochairman and managing general partner of the Sox. Werner, a California resident who plans to buy a residence in the area, would be the other cochairman. They plan to make Lucchino, a former president of the Baltimore Orioles and San Diego Padres, the chief executive officer of the Sox. Lucchino also will buy a home in the Boston area.
Les Otten, the Maine skiing mogul, would serve as vice chairman in charge of the project to rebuild Fenway Park and advanced new technologies in the stadium, such as wireless seat-back devices to call up player statistics.
Werner made no commitment on the issue of whether they would keep general manager Dan Duquette. He said they were entrusting all decisions about baseball operations to Lucchino. “Larry is a seasoned, well-respected baseball executive, and we are excited to introduce him to Red Sox fans,” Werner said. “As owners, we expect him and his staff to make the baseball decisions.”
Selig said in an interview with the Globe last month, “John Henry is a very smart man. He’s a quiet and thoughtful person and he certainly has been a terrific owner.”
Harrington said he “took very seriously” his responsibility to maximize profits for the Yawkey Trust. If the sale goes through as announced, the Yawkey Foundation II would apparently become the second-largest private foundation in Massachusetts. Proceeds from the team sale would give it assets of more than $400 million, apparently second only to the Barr Foundation, established by cable-television pioneer Amos B. Hostetter Jr. and his wife, Barbara, according to recent tax filings.
The Henry-Werner deal also allows the limited partners to trade their stake for an equal ownership stake in the new ownership group, under terms to be finalized later, according to executives close to the sale. Werner said he and Henry are eager to sell shares of the company to other local investors.
“We want to have as many people join us as investors and fans who can help us achieve our goal of a championship team. We deeply appreciate the trust that the team’s limited partners and John Harrington have shown in us,” Werner said.
Henry has received league approval to sell the Florida Marlins and plans to move once the Sox deal is complete.
Other local business figures involved in the team include Boston advertising executive Ed Eskandarian; Ben Cammarata, the chief executive of Framingham-based retailer TJX Cos.; and Marty Trust, an apparel-industry executive.
The Henry group includes as a minority investor The New York Times Co., owner of The New York Times and The Boston Globe. The Times Co. has pledged not to interfere in the papers’ coverage of the Sox. Times Co. executives have said they are chiefly interested in the team’s 80 percent stake in the New England Sports Network and creating new cable TV programs with Globe sportswriters.
Russell T. Lewis, president and CEO of the Times Co., said last night: “We are extraordinarily pleased with the outcome. John Henry and all the other members of our group care deeply about the Red Sox and Boston and will proudly continue the stewardship of the Yawkeys.”
At yesterday’s daylong meeting of limited partners at Fenway Park, which began at 11 a.m. and ran for more than nine hours, the main question on the table was which group was most likely to be approved by baseball owners to finalize the sales.
Through a day of discussions, the limited partners came to decide that while they may have been able to get slightly more money by selling to Dolan or Prentice, those groups were much less likely to win owners’ approval than the Henry-Werner group.
In the end, the extra money that could have been made, the partners decided, was not worth the risk of months of delay - and possibly rejection by owners that would force them to start the bidding over again. They also cited the unspecified terms and conditions attached to the Dolan and Prentice bids.
Most of the limited partners, who as a group own 23 shares, bought them for $500,000 a unit in the late 1970s. They stand to make a $20-for-$1 windfall from the sale of team if their shares are bought out. Harrington inherited his single limited partner unit from Jean Yawkey, Tom Yawkey’s wife, who inherited the team after his death.
The final talks were nearly knocked off course yesterday morning when O’Donnell threw the team a curveball. Just hours before Harrington was set to meet with the limited partners, O’Donnell walked away from the proposed partnership with the Henry-Werner group. His decision stunned the Red Sox, because Harrington was set to recommend the combined group to the team’s limited partners.
In an early-morning meeting with attorneys for both groups, however, O’Donnell and Lucchino could not reach an agreement on whether O’Donnell or Henry would make final decisions for the team, according to people familiar with their discussions.
The Henry group had signaled its willingness to have O’Donnell attend Major League Baseball meetings as the team’s designated owner. But Henry insisted on being the general partner, who would have ultimate authority to hire and fire for the organization.
The negotiations between the two groups, which had started on Saturday, broke down over the control issue, both groups said.
Shortly before the meeting of the team’s limited partners, O’Donnell notified the Red Sox that his group would not participate in a joint bid with the Henry group. O’Donnell also withdrew his group’s individual bid, submitted on Monday, for 100 percent of the team. O’Donnell declined comment yesterday on why he did not remain a bidder in the auction.
When Harrington went to bed on Wednesday night, he believed that an agreement between the two groups would be finalized by yesterday morning in the form of a binding contract, the executives said. He expected the agreement to be delivered to the Red Sox’s attorneys early yesterday morning.
Despite O’Donnell’s withdrawal, the Henry group remained in the auction, standing by the reported $650 million bid his group submitted on its own earlier this week.
Although O’Donnell’s group was exected to provide more than $300 million toward a joint bid with the Henry group, Henry reassured the Red Sox that his group still had the resources to finance its bid on its own. Henry has made a fortune in commodities trading and is reportedly prepared to initially invest as much as $300 million in the Red Sox. The group, however, has said it will seek additional investors, which would allow Henry to reduce his investment.
A combined Henry-O’Donnell group was expected to win quick support from Major League Baseball, since Henry and Werner enjoy good relations with Selig and with team owners. O’Donnell, head of Boston Concessions, was seen as a strong local presence.
Meanwhile, Dolan, the reported high bidder in the first round of the sale, had increased his offer on Monday, according to an executive close to the sales process.
Dolan, however, was seen as having a major problem with his bid for the Sox because his younger brother, Larry, owns the Cleveland Indians. Some baseball owners feared having the brothers own rival teams would create conflicts of interest for both.
Larry Dolan bought the Indians last year for a then-record $323 million, in a deal that, federal securities filings showed, relied heavily on family trusts funded by Charles Dolan’s Cablevision wealth.
Dolan’s local spokesman, Nancy Sterling of ML Strategies, said, “We would like to congratulate the winning bidders in their successful quest to own the Boston Red Sox. Although we are extremely disappointed that the Red Sox did not select our very competitive bid, we appreciate their serious consideration and wish the new owners every success in their efforts to bring a championship team to Boston.”
But privately, several advisers to Dolan complained that there were few rules governing the bidding process, and they were changed almost constantly to Dolan’s detriment.
People close to the losing bid teams said that Harrington this week took several steps that enhanced his clout with the limited partners, who control the other 47 percent ownership of the club. This week, Harrington negotiated an eight-year extension on the food and beer concessions contract for Fenway Park with Aramark Corp., one of the limited partners with 7.5 of the 23 shares. There are still two years to run on the company’s current contract.
Harrington also negotiated a contract extension this week for Dr. Arthur Pappas, the team’s medical director, who is also a limited partner, with two voting shares.
Mayor Thomas M. Menino, who will be a crucial player in any discussions about the future of Fenway Park, declined to comment last night.
“Until he gets the details of the deal and the ownership team, he will not have any comment,” said Carole Brennan, the mayor’s press secretary.