Inside the breakdown of the Mets sale

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Earlier this week the $2.6 billion sale of the Mets, seemingly agreed upon between sellers, Fred and Jeff Wilpon, and buyer, billionaire hedge fund manager Steve Cohen, fell apart. Cohen walked away, the Wilpons waved him goodbye and that, it would appear, was that.

The reasons for the deal breaking down are still a bit murky, but today the New York Post reported that it was a matter of control: specifically, who controlled the team as the official “Control Person” — a legal term under Major League Baseball’s constitution — for the next five years.

Original reports of the deal said the Wilpons would retain control for five years at which point Cohen would take over. According to the Post, though, this came as a surprise to Cohen, who thought he’d have more say than that:

When he realized Wilpon was going to really be in control for five years while Cohen owned a majority of the team’s equity, Cohen got uncomfortable with the deal and worked at changing the terms.

“Steve thought he would be controlling the shots. He would be the power behind the throne. Baseball balked at that,” a source said.

He either did not understand what he signed in the term sheet, or thought that once he had the deal he could significantly alter the terms, a source said.

A source close to Cohen disputes that it was clear that the Wilpons would be in charge for five years. The source says that, in reality, the parties intended to work out a more fluid transference of team governance than that, under which Cohen would assume power over time. The Wilpons, however, insisted on the idea that being the “Control Person” for five years meant that they would have full control for five years. Cohen then tried to change the payout terms of the deal — reportedly switching from a gradual buy-in over time, or perhaps reducing the total amount as opposed to an up-front $2.6 billion payment, but the Wilpons balked.

The report suggests that the Wilpons had Major League Baseball’s backing in their interpretation of the term sheet, as the league does not recognize multiple Control Person[s] or what have you, but that strikes me as a bit off.

The Giants, for example, are owned by a large group. The team has a board, basically, and it elects their Control Person. That person has changed at least twice, going from Peter Magowan to Bill Neukom to Larry Baer to Charles Johnson, all without a sale of the team. Major decisions are, likewise, handled via votes of the many owners, even if proxies are given to Johnson or whoever the Control Person is at any time. Similarly, the Cubs are owned by the Ricketts family, which administers the team via a board (i.e. the family all voting on stuff), even if Tom Ricketts is the official Control Person in the eyes of MLB.

Which is to say that the Wilpons could’ve agree to a different structure along the lines of the Giants and Cubs or along any other lines they could think of without running afoul of the “one Control Person” rule. It just seems that they didn’t want to. They wanted to have their $2.6 billion cake and to eat it too. Which seems rather unreasonable to me. Doesn’t that seem unreasonable to you?

But it gets worse: apparently the Mets, possibly with the backing of MLB, are seeking to have Cohen blackballed from purchasing any other team. From the Post:

Nevertheless, the Mets and MLB believe Cohen acted in bad faith and that, coupled with his record as a controversial hedge fund manager who was suspended from managing outside money, he may not get the support from owners to buy a team again.

“It would be in question,” a source close to the owners said.

I’m not going to lay down much to defend Cohen, who has a somewhat checkered business history, but the idea that Major League Baseball would blackball him because he backed out of the deal after what sounded like an insane demand on the part of the Wlipons is kind of nuts. On the one side you have a multi-billionaire who wants nothing more to purchase what should be one of your league’s marquee franchises and, in the process, increase the value of the 29 other franchises by virtue of that big, big sale price. On the other side you have the Wilpons, who have repeatedly mismanaged said would-be marquee franchise and clearly want out, but not before making unhinged demands that would rightfully put off any other buyers who might come down the pike. And the league sides with the latter over the former? Really?

I don’t know what magical powers the Wilpons have over Major League Baseball, but they are formidable.