Baseball megadeal a toast to rich owner's leverage
© St. Petersburg Times, published December 15, 2000
The most lucrative contract ever in American professional sports was signed this week by baseball's shortstop wonder Alex Rodriguez and the Texas Rangers.
The deal, worth $252-million over 10 years, was called "stupefying" by Major League Baseball. Many sports franchises -- the Tampa Bay Devil Rays among them -- could be bought for less money than 25-year-old Rodriguez alone will be paid.
But let's not overlook another big winner: Rangers owner Tom Hicks. Hicks handily outbid the country's few other baseball team owners rich enough to vie for A-Rod's services.
Baseball still likes to hype itself as America's pastime. But for Hicks, the Rodriguez deal is pure business.
It's no coincidence Hicks is an investment banker renowned for leveraged buyouts. The Rodriguez transaction is one smart LBO.
But it's just one of Hicks' many pokers in the financial fire.
While A-Rod's big bucks wowed the country this week, Hicks was wrapping up a bigger deal.
His private Dallas investment firm -- Hicks, Muse, Tate & Furst -- agreed to sell prestigious international champagne makers G.H. Mumm & Cie. and Champagne Perrier Jouet for $506-million in cash. Mumm is the third-largest champagne house in the world, and Perrier-Jouet produces brands including Belle Epoque, known as Fleur de Champagne in the United States.
The net proceeds will be about four times what Hicks Muse paid for the companies in July 1999, just 17 months ago.
And remember who sold the Texas Rangers to Hicks in the first place: his buddy, George W. Bush. As in the president-elect.
So, too, is the A-Rod deal. Hicks wants to sell the rights to name the Rangers ballpark, and he is developing the surrounding acreage. If Rodriguez brings a championship, baseball analyst Andrew Zimbalist suggests, Hicks' payoff "comes in the form of tens, if not hundreds, of millions of additional dollars in real estate and advertising value."
Nor does it hurt that Fox Sports Net, a regional sports station, will pay at least $550-million over 15 years for rights to the Rangers and Dallas Stars, the pro hockey team also owned by Hicks.
Billionaires, many made rich by the tech boom, are starting to eye ownership of baseball teams as a fun hobby. (Latest example: Roger Marino, a high-tech tycoon who once owned the Pittsburgh Penguins, is one of the bidders for the Boston Red Sox.)
How does the Devil Rays ownership group compete against that increasing kind of financial clout?
There is no individual billionaire owner behind the Rays. Rather, the Rays belong to an at-times unwieldy (and at-times grumpy) group of somewhat prosperous business executives, mostly from Central Florida.
A-Rod's $252-million contract won't stay the richest in sports for long.
Against the thick wallets of Hicks and perennial spender George Steinbrenner of the New York Yankees, it hardly seems much of a level playing field.
Well, no kidding. Who said the business of baseball is fair?
A Sprint shareholder sued company executives this week, alleging Sprint CEO William Esrey and four other senior managers used the failed merger with WorldCom to get an early grant of $600-million in stock options. Sprint executives pushed forward with the merger, despite knowing that regulators would oppose it, in order to take advantage of an accelerated stock plan, the suit alleges. And blessing this alleged fraud, the suit says, was Sprint's board of directors, including: Tallahassee lawyer (and TECO Energy director) DuBose Ausley, Belleair resident and former Eckerd Drug chairman Stewart Turley, and former Barnett Banks chief executive Charley Rice. Sprint had no comment.
Hello, Dollywood? Dixie Stampede, a Dolly Parton-controlled business, just bought 12 acres of land in Orlando and is talking about building a "family attraction." The land is adjacent to Interstate 4, midway between Disney World and Universal Studios. Details will be coming soon, promises Dixie Stampede chairman Fred Hardwick. . . . At the upcoming Florida Venture Forum annual conference in Boca Raton, 23 young high-tech companies will have 12 minutes each to pitch their business plans to some 200 attending venture capitalists. Twenty of the 23 hand-picked companies are based in Florida, but only two are from the Tampa Bay area: Open-Network Technologies in Clearwater, and Mediabrowser in Largo. Where did all the local entrepreneurs go?
Progress Energy, newly named owner of Florida Power Corp., introduced itself to Wall Street and investors this month with an eye-catching ad of a sumo wrestler riding a skateboard. The North Carolina company's next ad will show an African bull elephant running full tilt amid gazelles. And the third and last ad in the series depicts an aircraft carrier skimming over the ocean so quickly that its bow is raised out of the water. Someday, maybe an ad will show Florida customers leaping tall buildings because electric rates were lowered. Progress Energy's other electric utility, Carolina Power & Light, this month defended its plans to store large amounts of highly radioactive waste at one of its North Carolina nuclear power plants. How likely is a disaster? "It's three chances in a hundred million," a CP&L attorney told federal regulators. "That starts to get into theology of how many angels can dance on the head of a pin. It's a meaningless number." Struggling J.C. Penney Co. this fall picked Wayne Harris as the new leader to revive its struggling Eckerd Drug unit, the nation's fourth-largest drugstore chain. Now we know what Harris will be paid to perform his magic. Try $700,000 a year in base salary, an annual bonus up to hundreds of thousands of dollars based on performance, plus $600,000 in cash to be paid in chunks over the next three years. Eckerd better sell a lot of toothpaste, deodorant and film -- quick.
- Robert Trigaux can be reached at (727) 893-8405 or firstname.lastname@example.org.
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