Red Sox buy Redsby Jonathan Halket
October 19, 2010
John Henry, Tom Werner and the rest of New England Sports Ventures, the owners of the Boston Red Sox, have bought the Reds for about $480 million. No, not the Reds from Ohio, but rather the English Premier League soccer team, Liverpool. The principal seller was another American baseball grandee, Tom Hicks - past owner of the Texas Rangers.
The sale itself was contentious, with Hicks trying to retain control of the team while much of the rest of the board voted to sell to NESV. Hicks was probably trying to hold out for a higher bidder, seeing as he stood to lose over $200 million by selling to NESV. But the team had a large payment on its debt due by the end of the day and Hicks did not have the cash to pay it. With the chief debt holder, Royal Bank of Scotland, refusing to discuss terms with other bidders unless they were first approved by Liverpool's board, NESV seemed to be in the driver's seat. Still, Hicks made one last attempt to stall by petitioning and temporarily getting an injunction declared in a Texas court. The move only bought Hicks a night, however, as by daybreak it seemed that he was in danger of being held in contempt by the English court that had been previously dealing with the matter.
The early consensus is that the purchase should not deprive the Red Sox of any of the funds necessary to compete with the Yankees on the free agent market. However, my understanding of the EPL is that it is more cash driven than Major League Baseball; so in times of trouble more liquid funds may be diverted to Old Europe. Indeed, it was cash flow problems that forced Hicks to sell the team (not unlike his problems with the Rangers). Unlike in MLB, there are serious repercussions for a team that gets into, or just close to, bankruptcy in the EPL. Just last season, Portsmouth was docked points in the standings for going into administration - enough points to ensure that they would be relegated to the second division of English Football. Imagine if that happened to the Dodgers, the Rangers or the Cubs!
Moreover, unlike most professional baseball stadiums, EPL teams finance their own stadiums. Building stadiums cost teams lots of money, obviously, which means teams take on lots of debt. Liverpool is reportedly in need of a new stadium - in fact Hicks was disliked by fans of the Reds for, among other things, dithering over building a new facility despite promising to build one when he bought the team. NESV has been slightly more circumspect about building a stadium, but expectations are still high.
Meanwhile, Liverpool has gotten off to a poor start this season. While most expect that the new owners will spend as much money as necessary to avoid a bottom of the league tables finish—and the resulting relegation and loss of millions in revenue—Red Sox fans may be wondering if that means fewer goodies under their Christmas tree.
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