Jerry Reinsdorf’s sons seek minority stake in Chicago White Sox

It is unclear how many limited members are involved with the team and how much of the club they collectively own. But the younger Reinsdorfs, including Michael, who is president and chief operating officer of the Jerry Reinsdorf-owned Chicago Bulls, are seeking a stake in a Sox franchise that his 85-year-old father “strongly suggested” that his family sell. after he dies, according to a 2013 Chicago Tribune report. While owning a limited partner stake would not give the young Reinsdorfs more voice in the team’s operations, Michael Reinsdorf suggested in a statement to Crain that the intention to buying indicates a long-term interest in the White Sox property.

“This is an opportunity for many of the veteran members of the Chicago White Sox to monetize their investment, some of whom have been with the team for 40 years,” the statement said. “Jonathan and I believe in the growth and long-term prospects of baseball and the Chicago White Sox.”

The timing of the offer suggests that potential buyers might be trying to enter at a relative discount. Michael, 53, and Jonathan, 51, are vying for a slice of the franchise as they suffer huge operating losses amid a COVID-19 pandemic that cut short the 2020 season with games mostly played in empty stadiums. . The teams hope to be able to sell some tickets for the upcoming 2021 season, in which bookmakers have placed the Red Sox among the favorites to win the World Series, but it’s unclear if or when that will happen.

Those financial losses, combined with a possible work stoppage after the expiration of the collective bargaining agreement between the owners and the MLB Players Association on Dec. 1, could motivate some minority owners to collect rather than go through an ongoing economic struggle. .

Some of the franchise’s original investors also died or sought to cash in on their stakes in the team as the values ​​of professional sports franchises soared over the past decade. That trend, driven in large part by the massive sums media companies have paid for game streaming rights, pushed the White Sox’s estimated value to $ 1.7 billion last year, roughly three times what it was. they were worth a decade earlier, according to a Forbes report. The group led by Jerry Reinsdorf originally bought the team for $ 19 million.

Sports business consultant Marc Ganis said sales of minority stakes in teams have become more common among franchises that gained new sets of owners in the 1970s through 1990s.

“Many of those investors are quite old or have passed away, yet (the franchise’s) values ​​have risen significantly,” said Ganis, president of Chicago-based SportsCorp., Which has worked with multiple teams in several major leagues. in relation to ownership interest. Sales. “There could be a significant impact on estate tax for those who have died or may soon die with no income to make up for it. Therefore, for estate planning purposes, many limited partners are looking for ways to at least monetize the earnings, or phantom earnings, which have occurred. generated over the years as valuations have risen. “

Ganis said limited partners who sell team shares generally do so for 25 to 40 percent less than what they would be worth if they were cashed in as part of a general team sale. The discount explains the fact that limited partner shares have no control of the team and can be difficult to sell, as the majority owner of a team generally has the power to decline the sale of shares to another buyer.

That means the move of the Reinsdorf children could also put them in a position to make a profit if Jerry Reinsdorf decides to sell the team, likely making more profit on his limited stock than they paid for. “If they buy enough shares at the uncontrolled discount, then they have more incentive to sell the whole team,” Ganis said.

But there is no indication that selling the team is in Jerry Reinsdorf’s plans. As he told the Tribune in 2013 and has since echoed, he plans to own the team until “I don’t wake up or have no idea who Harold Baines is.”

It’s unclear who is on the White Sox’s current limited partner list. The Tribune reported in 2013 that there were “dozens” of such investors.

The franchise’s board of directors includes several octogenarian Chicago businessmen, including Katten Muchin Rosenman founding partner Allan Muchin, real estate veterans Judd Malkin, Robert Judelson. Another, Burt Ury, is in his 90s. Other board members include former trader Jay Pinsky and Lee Stern, a longtime trader at the Chicago Board of Trade and former owner of the Chicago Sting professional soccer franchise that closed in 1988.

Ganis also noted that the Reinsdorf brothers’ move comes after Major League Baseball changed its bylaws in 2019 to allow mutual funds to buy minority stakes in several different teams. The change was intended to allow current owners to sell minority stakes in franchises amid elevated team valuations.

Source link