The Wall Street Journal-20080213-Extra Innings- Zell-s Aim to Sell Cubs- Stadium Separately Slows Deal

Return to: The_Wall_Street_Journal-20080213

Extra Innings; Zell's Aim to Sell Cubs, Stadium Separately Slows Deal

Full Text (1262  words)

For Chicago Cubs fans angst-ridden over yet another disappointing finish by their beloved team, the refrain has long been "Wait 'til next year."

The same mantra could now be applied to the sale of the team. Real- estate tycoon Sam Zell, who led the buyout of the Cubs' parent, Tribune Co., had hoped to unload the team and its ballpark, Wrigley Field, by opening day in late March. But the deal is fast turning into one of the most complex transactions in baseball in years.

The main hitch is that Mr. Zell wants to take the potentially more lucrative step of selling the team and the stadium separately, peddling Wrigley to a state agency. His desire to put the 94-year-old stadium in public hands has sparked a drawn-out debate among state and local politicians and neighborhood groups that could delay the deal for months. And no prospective buyer of the Cubs, who start spring training today, is going to bid on the team until the fate of the stadium is known. While some teams are fortunate enough to pay artificially low rent in publicly owned stadiums, absent that scenario, teams would generally prefer to own their venues so they can tap them for profit as they see fit.

Would-be buyers, some of whom have been waiting since late 2006 to examine the Cubs' financial records, say privately they are baffled by the process, adding that the odds are great that Tribune will still own the team and the stadium into 2009. "All of the air has gone out of the balloon as far as momentum," one of the likely bidders says. Mr. Zell says he hopes to learn within 60 days whether he can pull off his multipart deal.

The Cubs are one of baseball's iconic teams -- they have been around since 1876 and boast a national following few North American sports franchises can match. The sale is being closely watched in part because of Mr. Zell's unusual strategy of separating the team from the stadium. Most observers believe that he will make more money that way, but the looming question is whether those gains will compensate him for the greater hassles. In particular, Mr. Zell has to contend with Tribune's heavy debt load of about $13 billion resulting from last year's buyout that the Cubs and stadium sale would help alleviate. Tribune has sold assets valued at $125 million since Mr. Zell took over.

Another potential hurdle for Mr. Zell is that he and Major League Baseball may have different notions about the ideal buyer -- and MLB owners, not Mr. Zell, have the final say. Mr. Zell is presumably eager to find the highest bidder. MLB Commissioner Bud Selig, however, tends to place a premium on people who won't make waves once they join the fraternity of baseball owners. In 2002, when the Boston Red Sox were on the block, cable mogul James Dolan offered the best price, but Mr. Selig's preference for John Henry swayed the deal in that direction. Mr. Zell, an iconoclastic and stubborn businessman, is unlikely to go along with Mr. Selig's dictates easily. A spokesman for Mr. Selig declined to comment.

MLB executives have long denied favoring any particular suitor for the Cubs, despite reports in the Chicago media that Mr. Selig is partial to private-equity honcho John Canning Jr. Mr. Selig and Mr. Canning are longtime friends, and Mr. Canning held a stake in the Milwaukee Brewers when Mr. Selig owned the team. (Mr. Canning still has an 11% stake in the Brewers, which MLB rules would require him to sell if he bought the Cubs.)

Beyond Mr. Canning, at least a half-dozen parties have expressed interest in the Cubs, including technology billionaire Mark Cuban, who also owns basketball's Dallas Mavericks, and the family of Omaha billionaire J. Joe Ricketts, who started the online brokerage Ameritrade, now a part of TD Ameritrade Holding Corp. Formal bidding cannot begin until Tribune presents the deal book on the Cubs, which contains the team's financial details. Tribune spokesman Gary Weitman says there is no set timetable for that.

Mr. Zell, who took effective control of Tribune in December in a debt-laden, $8.2 billion deal, is hoping to get a total of about $1 billion for the team, the stadium and for 25% of Comcast Corp.'s SportsNet Chicago, the regional cable network that shows some Cubs games. So far, the most ever paid for an MLB team is $660 million in 2002 for the Red Sox, which included the team's stadium and a broadcast component. (The Red Sox now are widely believed to be worth far more than that.) On top of paying off the likely heavy debt from the purchase, the Cubs' new owner will inherit a team payroll that ballooned last year to about $116 million, fifth-highest in the major leagues, thanks to fat contracts for players like Alfonso Soriano and Derrek Lee.

In recent years, the Cubs have failed to consistently make money, according to a person familiar with their finances, and not having Wrigley would complicate matters for the new owner. "We'd rather own the property so that we'd have the ability to make whatever changes we feel are necessary," says Thomas Mandler, a lawyer who is part of a Chicago-based consortium likely to vie for the team.

Even if the new owner doesn't get the stadium, he or she would certainly have some input into the management of the facility. Possible steps to boost the Cubs' revenue, beyond raising ticket prices, would include squeezing in more high-price luxury boxes, perhaps at the expense of regular seats, and boosting sales in what is now the major league park least cluttered with signage. Current Cubs Chairman Crane Kenney also has raised the specter of something many Cubs fans consider sacrilegious -- selling naming rights to the stadium, which is named after chewing gum magnate and former owner William Wrigley Jr. One limitation: Wrigley's brick outfield wall and giant scoreboard have been designated local historical landmarks -- as has the ivy on the outfield wall -- so those areas are off limits for advertisers.

Mr. Zell's first choice is to sell Wrigley to the Illinois Sports Facilities Authority, a public agency that owns the crosstown White Sox's U.S. Cellular Field and helped to fund the extensive renovation of Soldier Field, Chicago's pro football stadium. A public body would have the ability to pay more for the stadium because it could issue bonds for the purchase at a lower rate than a private owner.

The plan has a number of powerful supporters, including Jim Thompson, a former Illinois governor who is now the chairman of the ISFA. Illinois Gov. Rod Blagojevich has signaled that he is open to the ISFA plan. Chicago Mayor Richard M. Daley declined a request to comment, but he has backed the idea in the recent past. For supporters, the plan is appealing because it would allow them to keep a state treasure in the public domain. But Mr. Thompson says getting the blessing of the city council, including a powerful alderman in the Cubs' district, and the state Legislature is "daunting." That alderman, Tom Tunney, opposes the plan, saying the Cubs already have functioned for years without public help. He says the plan must ultimately meet community approval, and "the community has said, 'Why would we do this?'"

The Democratic-controlled Illinois Legislature would have to approve a bond issue, and though Gov. Blagojevich also is a Democrat, he has often tangled with top lawmakers.

---

Robert MacMillan contributed to this article.