News broke this weekend that Chuck Greenberg's group had reached an agreement with Tom Hick and the Hicks Sports Group to purchase the Texas Rangers. This ended about 45 days of negotations that began shortly after the Winter Meetings and culminated in an agreement for somewhere around 500 million.
The final sales figure has been withheld, but it's now about ironing out formalities, which should be completed by April. What does this mean for the Astros (i.e. why should you care)? Let's go to the bullet points.
- The sales price is less than 570 million but more than 500 million. The Hicks Sports Group has 525 million in debt currently after Hicks over-leveraged the group in running the Rangers over the past few seasons. The agreed-upon price could cover all this debt, but that isn't a given. The Rangers were valued at 405 million last spring with revenue at 175 million, meaning the sales price will be about 100 million over what the team was worth last April.The Rangers also have a ballpark that's six years older than Minute Maid Park, with gate receipts (36 million) less than half that of the Astros (78m).
- Looking at a possible Astros sale, the Astros have more revenue at 194 million, more gate receipts, 45 million more in value and, most importantly, less debt. This last point is the most important when talking about these two sales. Major League Baseball floated Tom Hicks a big loan two summers ago to make his payroll. When negotiations with Greenberg stalled earlier this month, MLB stepped into the fray to grease the wheels. Whether this was because of the loan or for some other reason, it still affected the final bidding process. Basically, MLB forced HIcks to sell at this time, rather than pulling back out and getting his preferred deal. One of the reasons for this was probably because Hicks' issue was not with the money, but with his role on the team. Reports for months have talked about Hicks' desire to stay on in a primary role after the sale. In effect, he wanted his group to sell to him, thus keeping him in charge without mountains of debt. The Astros don't have this problem. Drayton is under no such pressure to sell or in debt to MLB. He can take his time to find a price that he finds acceptable.
- Going further with this last thought, if you look at what the final price could be for the Rangers, it seems like the upper limit for a sale of the Astros would be around 600 million. McLane was asking for 100 million more than that in his current negotiations with the Big Investment Bank. This in spite of his gate receipts probably falling last season along with his revenue. That probably doesn't bother Drayton, though, because he's in a position to set a price and have someone meet it. He's in no hurry to sell. In fact, it's been made clearer by guys like RIchard Justice that this is more a case of estate planning. McLane's sons and wife have no interest in running the team when he's gone, meaning the team would probably be sold in that case. The US estate tax would take about 45 percent of the value in that case (assuming the McLane's lawyers and accountants couldn't figure out a way around this). So, the solution for Drayton is to sell the team before it gets to that point, thus getting full value for his family. That doesn't mean he has to sell tomorrow, but it does mean it'll happen sometime in the next few years.
- One of the things that Drayton has said is that he's not selling the team, he's just listening to offers. He recently granted an exclusive 30-day negotiating window to an investment group headed by former US Olympic Committee chairman Howard Schiller. The Greenberg group had a similar negotiating window and used it plus an extra 14-15 days. This means the fact we haven't heard much else about the Astros' sale doesn't mean it's dead; it just means things are still progressing. Reports from a few weeks ago suggested that the Schiller group was still collecting money for a bid. If they are serious, we could hear more sometime mid-February. If they can come up with the money and Drayton is willing, that means an agreement might be reached before March. Those are big ifs, and, unlike the Rangers, Drayton can always accept more bids after Schiller's negotiating window closes.
- The Astros are definitely entering into a good period for a possible sale, as they will have few big monetary commitments after this season. Really, it's just Roy Oswalt, Carlos Lee and Brandon Lyon that are currently under contract past 2010. Of course, there are options for Berkman and Brett Myers, but a new ownership group would have the ability to control costs early and/or make their own big splash signing.
- Lastly, Nolan Ryan has been accepted as a minority owner in the group, which only means bad things for the Astros affiliation with Round Rock and Corpus Christi. The minor league deal with Round Rock and Houston is set to expire at the end of the upcoming season and Ryan has expressed interest in the past of making the Express one of his Rangers affiliates. Currently, their Triple-A team is in Oklahoma City, so adding the Express would bring things closer to Arlington and the fact that Ryan is part of the Ryan/Sanders group, who own and operate both Round Rock and Corpus, certainly make things more attractive for the Rangers.
- What would the Astros do in this case? I'm not sure. They could always swap affiliate deals with Texas and take over the Oklahoma City franchise. I don't see Drayton buying a team and moving it to Beaumont, Temple or any other market closer to Houston. It's definitely going to make me take a trip to Round Rock in the next few months while I still can.