So what’s the story? Can David Einhorn take over the Mets for just $1 in three years or can’t he?
According to the usually reliable Mike Ozanian at Forbes.com yesterday, “In three years hedge fund manager David Einhorn could gain control of the New York Mets for $1.
“Last month, Einhorn and the owners of the MLB team, Fred Wilpon and Saul Katz, came to terms on a deal in which Einhorn would pay $200 million for a one-third stake in the Mets and would have the right to obtain a 60 percent interest in three years unless Wilpon and Katz returned the $200 million to Einhorn but allowed the hedge fund manager to retain his 33 percent ownership.”
“A banker familiar with the deal, says the ‘strike price’ for the 60 percent stake is just $1, meaning Einhorn could get 60 percent of the team for $200,000,001 in cash.”
Ozanian did not say the deal was final as it has not been approved by the MLB, but there are no apparent reasons that this won’t happen.
Indications are also that the team, as Ozanian put it, is “swimming in debt, bleeding cash and losing fans” and, as Fred Wilpon himself told Sports Illustrated a few weeks ago, is likely to post a $70 million net loss this year. All this in addition to a legal battle with Irving H. Picard, the trustee representing victims of fraud in the Madoff Ponzi scheme, who has filed suit seeking one billion dollars from the Wilpons. It seems that there is very little chance that the Wilpons can make their payment to Einhorn in 2014 and thus Einhorn will then become the majority owner of the Mets for a dollar.
But today, Ricardo Kaulessar reported on Hedgefund.net that “The Mets say any story about such a steal is simply a whiff.” According to a statement released by the Mets, “Like many other media reports speculating on the terms of a potential agreement, yesterday’s was simply false, too.” Kaulessar stated that “among other details of the agreement, if Einhorn got back his $200 million, he would end up with only 16 percent ownership.”
But what about the one-dollar deal? This morning, Foxsports.com says “It was reported at the time that Einhorn had an option to increase that stake after three years under certain conditions and for a particular price – but the exact price was not released.” Apparently as the reports were circulating yesterday the agreement was still being negotiated, so the terms could change.
But whether or not the $1 option is real, the rest of Ozanian’s post appears to be correct, which is (A) the Mets are near drowning in debt, and even if they get out of the Picard’s suit without paying a billion (a decision that is probably years down the road) there appears little chance that Wilpon and Katz are going to be able to pay back the $200 million loan and (B) Within three years David Einhorn will have a baseball team in New York. And there may be a (C): If the Mets continue to be in dire straits by this time next year — and there doesn’t appear to be anything on the horizon that can save the Wilpons – there may be a provision in the new agreement for Einhorn on up from minority owner to majority much faster.