Wednesday, March 28, 2012

Cain and the D-gers Record Sale Price

OK, now things are starting to get clearer for me now, shame on me for not connecting the dots.  Cain's agent is probably salivating about the D-gers big money cache coming as soon as the new owners sign the dotted line:  rumors had Fox offering McCourt something like 10 years at $150M per year, giving the D-gers as deep a pocket as the Yankees and Red Sox, at least $100M per year extra to spend on players.  Schulman clued me in on this concept with his blog post on the sale.

That is why the winning bid of over $2B by the group led by Magic Johnson should not have been surprising, with all that loot coming into their coffers soon, that justifies the high valuation.  And McCourt, who didn't have enough money to buy the D-gers in the first place, leveraging up the team massively, walks off with at least $1.5B for his troubles, thank you MLB and Bud Selig.  Heck, the Chavez Ravine real estate alone pays off his divorce settlement with his ex-wife, and he even keeps a share of that going forward (well, he has to find something else to do now that he has $1.5B to play with) along with pocket change (well, for him, "just" low tens of millions) after the divorce settlement (Jamie probably had one of the most expensive affairs ever, if she had stuck with him, she would be luxuriating in these riches too, though perhaps McCourt might have kicked her to the curb once the money started rolling in, some rich guys do horrible things like that once their wealth takes an exponential leap; but at least in that case, she probably would have gotten more out of any divorce).

One point that Hank did not expand enough on, so the ordinary fan might not fully understand, is his comment about the Giants getting richer.  Yes, the owners are now richer:  on paper.  The team can't really access that extra valuation on the team unless a bank is willing to loan them money, and even then, they have to pay it back eventually plus there are MLB rules on how much debt you can take, plus most of all, they still have the debt on the stadium.  I suppose the team could sell off additional shares of the team (any owner selling shares would get the money, not the team), but not enough to make up $100M extra spending by the D-gers going forward.

And thus the Giants are actually screwed right now.  According to what Ray Ratto noted in his stint on KNBR yesterday on the Razor and Mr. T show (I'm still amazed they go with this name for the show), the Giants are signed with CSN for the next 10 years, presumably at the price they signed on for when they signed the contract (Ratto also noted that the debt should expire after 2016 season, as he noted that the loan was taken in 1997; I recall another source mentioning 2017, however; at that point, the Giants would have roughly $20M more to spend each season).  Although at least the team owns a significant portion of CSN Bay Area, around 30-35% from what I recall, I doubt that CSN Bay Area passes on their income to the Giants regularly, and even if they did, it would not be $100M per year, especially since they only own 30-35% of this sporting network.

So I have to think that the stall was on because the agents set the price very high, due to the possibility of a new D-ger owner soon, and the Giants stalled too, to see what they are really going to be up against with the new D-ger owners, but mostly because the agents were asking for the moon.  And I have to agree with Schulman that, yes, Matt Cain just got a lot richer today.

He still thinks that the Giants will sign Cain to a contract.  I hope he is right.  I was hoping to hold off with a 5 year, $100M deal, but I think $115-125M is now probably where they will have to go to get Cain to sign on a deal.  I think Ratto said $110-115M, but at $120M, that works out to $24M per year, which is top money area (CC and Cliff), and per DrB's prescription of paying more per year to get a shorter contract, that's probably what's going to have to happen to get the deal signed.

Per the good points that Kawakami noted in his blog post about why signing Cain is so critical for the Giants, which Shankbone was kind enough to point out in the comments to my last post (thanks again!), the Giants really have to sign Cain for the team to look competitive in the coming years.  He is a linchpin for any Giants competitiveness going forward, as without him, then Lincecum is probably gone too (for sure, instead of maybe staying). 

But giving Cain top money would then mean giving Lincecum record settling money, $26-30M per season.  At that price, I hope Lincecum is still looking only for 2-3 year deals, as no team can afford the risk inherent with that, except for maybe the Yankees, Red Sox, and now the D-gers.  Lot of business risk the Giants will have to face in the coming years in order to keep the Giants in the running for Team of the Decade, but it looks like no other way other than to bite the bullet and hope that Shankbone and Tom Seaver are right that both Cain and Lincecum are horses built for the long-term.

Either way, the Giants should probably be picking up mostly starting pitchers going forward with their first round picks, their starting lineup is starting to look pretty good going forward.  Posey, Belt, Panik, Sandoval, Crawford in the infield, maybe Melky, Brown, Peguero (or Schierholtz) in the outfield, as I can see the Giants wanting to sign Cabrera should he have another season similar to his 2011 season, particularly since we don't really have any other OF looking like he'll be a starter, though Blanco might also be a possibility if he has a good 2012 season.  I doubt Melky can repeat his 2011 season, but if he can be close to that, they will probably want to keep him around longer.  Even if he is close to his 2009 form, they will probably still try to keep him around longer, just not for as much money.

4 comments:

  1. Sports talk radio is blowing up down here. This is a huge deal. The agent played it right, and maybe the Giants didn't even have a shot (yet?) but the playing field is shifted for sure. So instead of my 6/120 final offer you're thinking 5/120? Sounds good to me. No matter what whispers are being made, he'd be insane to walk away from that. Sabathia is a lefty, Lee is a lefty, if the Giants can (and they should) buck up to 120MM, no matter the amount of years, Cain should take it.

    If not, he's going to be a Dodger. And I hate to see that. Its extremely bad mojo for him, and its bad mojo for this RDF crew. I imagine after they stop partying with the value bump they just got they might think for a second about getting a jump on the competition, because its coming. For reals.

    I'd like to know more details about that CSN share, and how they rake it. Its pretty damn secretive. I know the Forbes profile paints one picture, but I just have doubts in my gut about it. I think the Giants are much more flush than they're letting on. The broadcast rights are byzantine with the 30% ownership. Or is it 35? Hmmm...

    I stand by my assertion that this collective crew is out of their depth for big time operations, baseball savvy and overall vision. That's not to say good baseball guys aren't in the org, and the Giants can't compete all decade. They can. And they can compete with losing Cain, although that one is tough to swallow, but they can weather that as well.

    ReplyDelete
  2. Ugh, more bad news: Baggerly's take: http://www.csnbayarea.com/baseball-san-francisco-giants/giants-talk/Record-setting-Dodgers-sale-will-change-?blockID=678984&feedID=10850

    Not only is it $2.15B, but it is ALL CASH. Apparently McCourt borrowed even more money, so he's ending up with "only" $700-800M. That's barely more than what the Mega-Millions winner would win in the next drawing on Friday.

    :^)

    Also Baggs on Cain/LAD: http://www.csnbayarea.com/baseball-san-francisco-giants/giants-talk/Dodgers-sale-adds-drama-to-Cain-talks?blockID=678954&feedID=10850

    "Based on what I’m hearing, the Giants and Cain, perhaps newly motivated by the Dodgers’ $2.15 billion sale, have picked up talks again on an extension that will keep the decorated right-hander under contract beyond this season. Where it goes is anyone’s guess. But I’ll stand by my earlier prediction that both parties have too much mutual interest for a deal not to happen."

    "But the Giants also need to be careful. Whatever they give Cain will be an absolute floor for what Lincecum will demand in his next deal. The Giants also cannot in good conscience give Cain a contract at his full, open-market value today because they would be assuming some risk of injury in 2012. They’re entitled to a discount because of that.

    I’ve tried to divine numbers from both sides and neither is willing to be so forthcoming. But my best educated guess is that it’s going to take five years and $110 million to make a deal come together by Opening Day.

    At this point, I'll take $110M. The signs look aligned, according to Baggs. He makes the good point about the risk, that would mark it down from the $24M/year.

    We'll see and I'll keep the fingers and other extremities crossed.

    ReplyDelete
    Replies
    1. Ooops, that's a quote market after Opening Day.

      And sorry Shankbone, wrote up a nice long reply then lost it. Tomorrow....

      Delete
  3. Here's my thought on this Doyer sale and McCourt: these guys are smart. They realized everybody was going to come in around 1.5BB-1.6BB and then haggle, McCourt would go back and forth and then put his famous foot in it. So they paid an idiot tax - 400MM more. They made it clear this was their one and only offer. 2BB is a nice round number. They also soothed his ego - that is what Magic is good at - he always presented very positive thoughts on McCourt the past six months, which again, is smart if you want to get the knucklehead out of there. In addition, they put emphasis on his foundation, made guarantees McCourt would be treated with respect on the way out. That is important as well.

    So the parking lots, the parking lots... Its a charged issue, and here they sidestepped it in a stroke of genius. 150MM extra to be paid into a fund. This is not entirely clear how it works, but here is my theory: it has to be paid at a later date. McCourt is a joint partner, not a principal. I have a strong hunch he's not going to be given voting authority or a real seat at the table. Its an ego thing, to allow him to "leave with his head high". So while he has some ownership interest in that 150MM partnership, I doubt its even close to 50%, and I doubt even more he has one ounce of control. Good luck being paid out on that. If they're as smart as I think they are, its heavily insulated against McCourt legal trickery. So while its being reported as a 2.15BB sale, I think that's inaccurate. They are paying 2BB, and then at a later date will invest money that McCourt gets a piece of. When you're looking at a minimum of 200MM a year for TV rights, this isn't that far fetched if you're long term about owning them. And as a old school NY family, you had better believe Mr Guggs saw this as a once in a lifetime chance. Long term, this is legit I think. The Giants RDF crew are a bunch of amateurs next to this. Sure Johnson is big time, but he's not really that into the whole thing.

    Last, McCourt steps in everything, is a total disaster and walks away with... Well, 2BB purchase, I've heard the debts are around 1.1BB, but don't know if that includes the 131MM to the ex-wife, and the IRS issues. I'm sure they will be right on the capital gains this time. He will most likely side step the state of CA, but maybe they get a cut. 900MM minus thirty percent for various lawyers, taxes, ex-wifes what not sound right? No way he doesn't clear 500MM while being one of baseball histories greatest buffoons.

    ReplyDelete

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