Own a piece of the Rangers

No, really:

Rangers owner Tom Hicks is attempting to sell a minority share of up to 49 percent of the ballclub he purchased in 1998, he said on Tuesday at the team’s Spring Training complex.
Merrill Lynch, the international investment banking firm, which became a unit of Bank of America last year, has been hired to sell minority shares of the team either in whole or part, two baseball sources said. The Rangers were born as the expansion Washington Senators in 1961 and moved to Arlington a decade later.

Hicks says that he’s going to retain 51-60 percent of the team in order to retain control, but doesn’t see a percentage in owning a greater percentage.

And he’s probably right about that. One of the things that no one in baseball really wants to talk about is that it is almost inescapable that franchise values are on the decline. How can they not be? So much of the ownership of a team is tied up in real estate, be it from owning or at least profiting from stadiums and parking garages or from holding interests in commercial development around ballparks. More importantly, many baseball owners themselves are real estate guys first — think Lew Wolff — and have taken baths in the current economy. These guys either need cash now or, at the very least, see that the cratering of the real estate market and the overall economic downturn is going to contribute to a decline in franchise value. Get out now or get soaked later guys like Hicks seem to be thinking.

This is going to have consequences beyond the bottom line of some wealthy plutocrats. For years the owners cried poor due to arguably flat revenues, yet failed to do anything to reign in salaries because they knew that whatever was happening with revenues, franchise value was increasing, and therein lied the true reason to get in the baseball business. Because of this, salary cap talk was kind of a hobby, the upside of which would really only contribute to some relatively marginal financial gains for team owners. Now, however, when the real value in owning a baseball team is at serious risk — and how can it not be when owners are issuing press releases that 40% of their team is on the market — don’t be surprised to see a little more seriousness on the part of owners when it comes to cost containment.

UPDATE: A companion post to this item can be found here.

ATTENTION ROB NEYER READERS: Welcome! A third piece in this series can be found here. It’s much longer with much greater detail, thanks to a particularly insightful guest poster.

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Comments

  1. RobRob said...

    An interesting aspect to this specific circumstance is that Hicks is also part-owner of Liverpool FC, the English Premier League soccer team.  Liverpool is trying to build a new stadium and has been stymied by the credit crisis.  In fact, as what should have been a serious red flag for the global economy a year or more ago, the co-owners of Liverpool nearly sold the club because they could not get financing for the planned stadium.

    So while MLB club-values may certainly be on the decline, I wouldn’t be surprised if this is also an attempt to raise the capital needed to break ground on a replacement home for Liverpool.

    Hicks has also been at odds with his co-owner, George Gillett, so perhaps he wants to buy him out as well.

  2. APBA Guy said...

    Bottom line is that Hicks wants cash. Whatever he could raise using the team as collateral is gone, thanks to declining values. As Trump said, during the previous downturn, Cash is King.

  3. Richard in Dallas said...

    If Hicks would stop treating the 5th largest market like it were small (with the exception of throwing truckloads of money at roided up ego cases), and actually follow through on a plan that’s in the process of working, spending as necessary to keep developing pitching, he wouldn’t be feeling any financial strain.  If he sells any of the club, he needs to sell it all.  Him keeping a controlling interest is the absolute worst thing that could happen to any future hopes we have about October baseball….

  4. Derek in Fort Worth, TX said...

    The thing to remember here is the Dallas area real estate is not depreciating at the same rate as most of the rest of the country.  The prices for houses and land didn’t get up to the extremely high inflationary prices in Dallas the way it did in other parts of the country. Therefore when the bubble burst, it didn’t have as far to go.  In fact they are still building 4 new houses in my neighborhood which should tell you how well things are here compared to other parts of the country.

  5. Jay said...

    Dick Jacobs did something similar with the Indians in the late 90’s.  Raised a little cash, and some diehard fans got to frame a stock certificate.  The filing requirements for a public company made for ssome interesting research fodder.  The Dolan family excercised their option to buy back all the shares shortly after buying the club in 2000.

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