Court approves sale of Dodgers
WILMINGTON, Del. – The sale of the Dodgers to a group fronted by Lakers icon Magic Johnson was approved in U.S. Bankruptcy Court on Friday, despite strong objections from Major League Baseball.
In six hours of tense and contentious arguments, MLB tried to re-assert control over the Dodgers, saying the Commissioner Bud Selig should have control moving forward – just as he would over any other team.
The Dodgers argued many of those decisions still belonged with the court under terms of a settlement reached earlier between MLB and outgoing owner Frank McCourt when he agreed to sell.
MLB attorney Thomas Lauria said the league was not trying to block the sale but wanted more information and time to review the deal because a number of the sale’s conditions appeared to be “inconsistent” with MLB rules. He also repeatedly complained that the recourse of a mediator enjoyed by the Dodgers was not fair to other owners. “We don’t want a league of the “the Dodgers and 29 other teams,” Lauria said.
In the end, Judge Kevin Gross sided with the Dodgers, confirming the post-sale role of mediator Joseph Farnan and saying he himself would rule on parking lot issues.
He also said the Dodgers would not have recourse to mediator for matters not specifically cited in settlement -- that is, most MLB rules.
Lauria said MLB had several issues and questions about the sales agreement – most pointedly regarding the structure of the new ownership group and the deal that had been struck with McCourt about the use of the land surrounding Dodger Stadium.
Lauria said MLB requested but had not received documentation regarding a joint venture between McCourt and the new owners, Guggenheim Baseball Management, about the stadium’s parking lots. The league had also asked for commitment letters from the ownership group’s equity partners, the delivery of which mediator Farnan ordered on Friday.
Dodgers’ attorney Bruce Bennett said the league had “manufactured” issues and implied that it may have been out of spite directed toward McCourt. He also said Farnan had found MLB to be a “serial violator” of the settlement agreement and that’s why the league wanted to end the mediator’s jurisdiction.
The contentious debate seemed to surprise Judge Gross, who, as arguments grew tense, quipped, “I had no idea. I thought this was going to be a celebration-type occasion.”
The sale is set to close by April 30. If the deal closes as scheduled, the Dodgers would play their first home game under new ownership May 7, against the rival San Francisco Giants.
McCourt took the Dodgers into bankruptcy 291 days ago, three days away from running out of cash to pay his players. Although he said he intended to retain ownership when the Dodgers emerged from bankruptcy, his surrender was rewarded with a handsome profit.
McCourt sold the Dodgers to the Guggenheim group for $2.15 billion, a record for a sports franchise. He retains half-ownership in the Dodger Stadium parking lots, and he is expected to net close to $1 billion in profit.
While Johnson will be the new face of Dodgers’ ownership, veteran baseball executive Stan Kasten will be the team president. Kasten, the former president of the Atlanta Braves and Washington Nationals, is an ally of Commissioner Selig.
Selig all but kicked McCourt out of baseball, rejecting a proposed television contract that would have given him a financial lifeline and charging him in court papers with “looting” $189 million from the Dodgers and diverting it for personal use. McCourt denied the allegation.
The Dodgers’ new controlling owner will be Mark Walter, chief executive of Chicago-based Guggenheim Financial, a company that says it manages $125 billion in assets. The purchase of the Dodgers -- all cash, save for $412 million worth of team debt assumed by the new owners -- is being financed by a mix of individual and institutional investors, the latter primarily from Guggenheim-managed insurance funds.
The individual investors include Walter, Johnson, Guggenheim President Todd Boehly, Hollywood executive and Golden State Warriors co-owner Peter Guber, and Texas energy investor Bobby Patton.
Walter, Kasten and Johnson were all in court on Friday, as was McCourt.
Walter has declined to specify the stakes of each individual owner or say what percentage of the purchase is being financed by institutional funds, other than to say the ratio of individual and institutional investors is “likely to be fairly balanced.”
Guggenheim is expected to add individual investors from the Los Angeles area after the deal closes.
McCourt and Guggenheim are forming a joint venture to own the Dodger Stadium parking lots. The money a fan pays to park at Dodger Stadium will be collected by the new owners, but neither McCourt nor Guggenheim has explained how the parties will divide the revenue the team generates from the parking lots.
And, although people familiar with the sale agreement say no development can take place on the parking lots unless McCourt and Guggenheim agree, neither party has shared a vision for the future of the property.
McCourt separated the team from the parking lots in 2005 and established a new entity to control the lots, in a transaction approved by Major League Baseball. That approval left MLB powerless when McCourt said he wanted to sell the team but keep the land, since the entity that controls the parking lots was not part of the bankruptcy filing.
McCourt bought the Dodgers for $421 million in 2004, with what his divorce attorney said was “not a penny” of his own cash. He ultimately parlayed ownership of Boston parking lots into ownership of one of the world’s most prestigious sports franchises, and then into nearly a billion dollars.