As you now well know from last month’s financial piece, among other things, the Ricketts Family has a 95% interest in the Chicago Cubs, and the financial picture for the organization in the long-term is extremely strong. You also know that the price for that 95% interest was about $825 million, and that Forbes recently valued the organization at $1.2 billion.
Add it all up, and you’ve got an investment that’s appreciated like gangbusters over the past few years, and savvy business folks who might want to lock in some of those gains while simultaneously opening up some liquidity for, say, an impending and significant capital project, like the renovation and development of an old ballpark.
Patrick Mooney broke the news that the Ricketts Family are indeed considering selling a non-controlling interest in the Chicago Cubs. It is a fantastic report, and well worth your time to read.
I checked with a Cubs source who confirmed that selling an interest in the Cubs is something under consideration, though he cautioned against making the leap from a cash-raising strategy to a suspicion that a deal with the rooftops, which would allow the cash-needing renovation of Wrigley Field to proceed, was imminent. Just because the Ricketts Family is considering their options for liquidity, I was told, does not necessarily mean a deal is immediately on deck.
With the home opener today, the window to achieve the hoped-for deal with the rooftops by “Opening Day” seems to be slipping away by the hour. Although not meeting that particular (arbitrary) date does not mean yet another construction year will be lost, if something doesn’t happen in the next few weeks, that’s going to become a reasonable question.
As for the sale of a minority interest in the Cubs, let me offer a few thoughts to anyone making any unreasonable leaps:
- The vast majority of baseball teams have a number of owners with a wide range of equity interests. There is usually “an owner,” who is the face of the club, and usually maintains a controlling (at least 51%) interest, but there can be a number of minority owners who also have a little slice of the pie. In this way, the Ricketts Family has been a little atypical so far, holding 95% of the team.
- Because what’s under consideration is a minority, non-controlling stake, the impact on the operation of the organization should be pretty much nil. This is essentially like selling stock in a company that doesn’t come with a vote. Yes, I suppose if one buyer paid for 25% of the organization, the Ricketts Family wouldn’t be able to close that deal without promising some involvement in the decision-making process. But I really doubt that’s how this will play out. Instead – and this is just my own instinct – I’d expect there to be multiple buyers taking a small slice each. They get an investment and some perks, but they don’t call any shots. Mooney’s report is consistent with that expectation.
- No, this doesn’t mean the Ricketts Family “can’t afford” the renovation. That’s actually a humorous fear, given that selling off some of your assets to pay for a project is, like, the definition of “affording” that project. Whether the Ricketts Family sold off shares of TD Ameritrade, or sold off a portion of their Cubs asset, there is no meaningful difference in their ability to “afford” the Wrigley project. Did you think they had $500 million in small bills laying under 10 million mattresses somewhere? This is simply a business decision: the Ricketts Family will need some cash to pay for the renovation, and one option is to sell a portion of one of their family assets that has really risen in value over the past few years.
- While I reserve the right to change my mind once this all plays out, I’m tentatively pleased to hear that this is one approach being considered to fund the renovation. Given what I’d learned in the process of researching and writing the financial piece, I had some serious reservations about the Cubs using additional debt to finance the renovation project. Although I’d been told that likely wasn’t going to be the case, it’s always nice to see further confirmation, and to know that the Ricketts Family has at least one strong avenue to raise the necessary cash.
- So, anyone wanna do a Let’s-Buy-a-Share-of-the-Cubs Kickstarter project? If the Ricketts Family sells, say, 30% of the business to three investors, each getting 10%, with a company valuation of $1.5 billion (that Forbes estimate will just be the starting point), we need to raise only $150 million to grab one of those 10% slots!