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Tribune may throw MLB a curveball

The firm could sell the Cubs franchise in parts. Its quest for the highest bid may cause friction.

September 15, 2007|Michael A. Hiltzik and Bill Shaikin | Times Staff Writers

With Major League Baseball entering the final two weeks of the regular season, the bidding for the Chicago Cubs is about to move into the hardball stage.

Tribune Co. announced in May that it would sell the marquee franchise after the current season as part of its privatization deal with Chicago real estate mogul Sam Zell. Estimates of the value of the team, its historic home at Wrigley Field and Tribune's 25% share of Comcast SportsNet, a regional cable TV network, have rocketed to $1 billion and beyond.

The Cubs, after all, are among the biggest draws in the major leagues. About 3.1 million fans flooded into Wrigley last year, keeping the stadium 93% filled despite the team's poor on-field performance. The Cubs finished in last place in the National League's Central Division, although they've come back this year and held on to first place by a slim margin going into Friday night's game with the St. Louis Cardinals.

But Tribune, which also owns The Times, is now pondering whether it might get more money by selling the pieces separately, according to people close to the Tribune transaction. Among other things, that would limit Commissioner Bud Selig's influence over the deal because Major League Baseball's authority extends only to the team itself. Selig has been accused of steering previous franchise sales toward bidders he favors, even when higher offers have been on the table, and he may have a strong preference this time.

A piecemeal transaction would also make the sale more complicated and probably push the timeline for its completion past the end of this year. And the league says it would represent a change of signals from Tribune.

"They've told us they're going to package them together," Selig said in an interview.

Sports-marketing experts generally believe that, in the end, a single deal will be made. But a Tribune source said the offering document provided to the league didn't commit the company to any specific combination.

Zell would have veto power over major transactions once he becomes Tribune's chairman if and when the deal is completed, possibly around the end of this year. Yet even now Zell, who holds one of the seven seats on the Tribune board, has a significant voice in corporate matters and wouldn't take kindly to being strong-armed into accepting less than the highest bid.

The Cubs deal may develop into an unusual public spectacle. Unlike most franchise sales, which involve groups of private individuals as buyers and sellers, this one involves a public corporation that has a fiduciary duty to obtain the best return for shareholders by accepting the highest offer, regardless of the bidder's identity.

On the other hand, as a group of private franchise owners engaged in a joint undertaking, Major League Baseball has a clear interest in approving sales only to buyers with whom the owners are comfortable -- not necessarily the highest bidders. The transfer of any franchise requires the approval of 23 of the 30 team owners.

"You're asking to be a member of a club, and the club has a right to say no, a former MLB executive said. "So this pits the principle of fiduciary responsibility against the right to belong to a club. The odds are it's going to be a long, drawn-out process."

The last time those principles were in such stark conflict was 2001, when the sellers of the Boston Red Sox accepted a $700-million bid from a group headed by baseball insider John Henry over two higher bids, including a $790-million offer from cable mogul Charles Dolan. The team and the league justified the outcome by arguing that the Henry group had a better chance of winning prompt league approval and the expected delay in the league's scrutiny of Dolan's bid would be costly to the sellers.

Still, the gap was so wide that Massachusetts Atty. Gen. Thomas F. Reilly threatened to block the sale on the grounds that it shortchanged the team's majority owner, a group of charitable trusts. After Reilly accused the league of "calling the shots" on the deal, it was restructured to give the trusts a larger share of the proceeds.

In the case of the Cubs, the suitor with the putative inside track because of its link to Selig is a group of Chicago businessmen led by John A. Canning Jr., chairman of the private equity firm Madison Dearborn Partners. Canning holds a part-interest in the Milwaukee Brewers, of which Selig was formerly the principal owner; he would have to divest that interest to acquire the Cubs. His group reportedly includes Andrew McKenna, the chairman of Chicago-based McDonald's Corp. and a former Cubs chairman.

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