Picture this, you are selling your private practice and have lined up potential suitors who are willing to buy it. One potential buyer lives in the neighborhood so is familiar with the surrounding area, has a great network of local vendors and other business owners. They also have the money available now and have agreed upon the cost of the sale. Another potential investor is not from the area, does not have any major business experience and does not have the available cash to purchase the company and would need to gather funding from other people. The best choice would be to sell the company to the first investor, right? Not if the second investor is named Derek Jeter.
Jeffery Loria sold the team to the “wrong” suitors.
Sorry Ice Cube, we won’t be playing Big Bank Takes Little Bank here. In a rare scenario, where the millionaire out banks the billionaire, Derek Jeter’s group has won the right to purchase the Miami Marlins over Miami native and Philanthropist Jorge Mas. Jorge Mas, a Cuban-American, earned his bachelors and masters degree in business at the University of Miami. He made his wealth in Neff Corporation (a provider of construction and utility equipment for rent) by starting the company with one store and expanding it to over 80 branches across the USA. Additionally, as early as 1994, Mas has been involved in Mastec Inc. (an infrastructure, engineering and construction company) and has helped it grow to a billion dollar company. Mr. Mas currently serves as the Chairman of the Board for the company and a has a history of holding a chairman position with other successful companies
Not a bad resume at all, but thats not good to be the next owner of the Miami Marlins. Derek Jeter’s resume on the other hand is. With five World Series titles, one World Series MVP trophy, and 14 all star game appearances, Derek Jeter steals another base in his career, but instead of it being in Yankee Stadium, this time its in Loria’s heart. Loria being the ultimate fan of baseball legends like Derek Jeter, forwent selling the team to billionaire businessman for instead a lesser suitor.
The Sweet (and Sour) Sixteen
The Miami Herald is reporting the investment group set to buy the Miami Marlins is made out of 16 different investors. The ones we know of or have been tied to the group are Derek Jeter, Michael Jordan and Bruce Sherman. While Jordan has other business ventures in his portfolio, the Charlotte Hornets where he is a majority owner, has been noncompetitive for most of his tenure.The third major player in the group is Bruce Sherman, a businessman from Naples, Florida. Sherman made his wealth by co founding Private Capital Management (PCM) and selling it for $1.4 billion. However Sherman lost a significant amount of his worth after some investments did not pan out, most noticeably the Bear Sterns collapse in the 2008 and investing in newspaper stocks. Its worth noting that Bruce Sherman is said to be the true “control” person and not Jeter. Instead, Jeter will run the baseball operations and businesses of the team which means he will be an “employee” of Sherman while still having equity in the franchise.
At this time the other fourteen investors are unknown, but the fact Jeter had to seek fifteen other partners to fund the purchase leads to the final point of this post, debt and cost cutting.
Debt and cost cutting
MLB limits debt of franchises to no more than 12 times annual revenue, minus expenses. We aren’t privy to how much of the purchase is debt but just to put it into perspective, the new ownership group wants to reduce payroll on the books that are reserved from the players. The Miami Marlins are already ranked in the bottom 10 of league when it comes to salary. Reading in between the lines, this means the investment group will need to cut costs in order to pay for some of the debt that they used to finance the deal and return the franchise to profitability. Looking at the Marlin’s payroll, the only player that’s above $16 million a year is Giancarlo Stanton. Jeter and company can be setting their eyes on flipping the Marlin’s franchise player for prospects and cash, especially now since his value is at a all time high. Its worth noting that Stanton does have a no trade clause apart of his contract, but will likely be open to going to a contender.
Although the price has been finalized by both parties, the deal is still under review by MLB and debt is a major concern for the league office. These reasons pose a great concern if you’re a Marlins fan and should be something to keep in mind. This would be a shaky deal normally on smaller purchases like buying a house or car (could you imagine having several investors on a house?) but times that by billion dollars and it could be very daunting.