Wednesday, March 28, 2012

Money talks - Why Mark Walter owns the Dodgers (and why Garvey - and Magic - don't)

Sports talk radio in Los Angeles is buzzing this morning. The local ESPN outlet has ditched its national programming and has local hosts devoting themselves to one story:

A group that includes former Los Angeles Lakers star Magic Johnson and longtime baseball executive Stan Kasten agreed Tuesday night to buy the Los Angeles Dodgers from Frank McCourt for a record $2 billion.

Steve Mason and the other hosts are taking calls, and most of the calls are praising Magic Johnson - former Los Angeles Lakers basketball star, successful Los Angeles businessman, and the smiling face who will turn the team around. Magic will do this; Magic will do that.

But with all due respect to Mr. Johnson, he isn't the reason that the Dodgers agreed to a sale yesterday.

After all, if you really wanted a public face for the new, post-Frank McCourt Dodgers, why not choose Mister Dodger himself, Steve Garvey?

Yes, some of you may recall that Steve Garvey was part of a group that wanted to buy the Dodgers. And that group also included Orel Hershiser. It sounds like something magical that would appeal to Major League Baseball - Garvey and Hershiser owning the Dodgers. A picture-perfect ending.

But who else was part of that group? As far as I know, the other members of the group were never publicized. And despite the fact that Steve Garvey was the public face of the group, you knew that he wouldn't have the money to buy the Dodgers himself. Garvey is a wonderful front man, but at the end of the day you knew that he wouldn't be controlling the team. And whoever was controlling the "Garvey" group apparently didn't pass muster - Garvey, Hershiser, and the others didn't make it past the first round.

Now to my knowledge, Magic Johnson has never said that he is broke. But you know that he doesn't have two billion spare dollars lying around.

So how did Magic Johnson get enough money to buy the team? He didn't.

However, unlike the Garvey group, we know Magic Johnson's other partners, including the one that DOES have the money. And the ESPN article mentioned Moneybags also, although it was buried in the fourth paragraph:

Mark Walter, chief executive officer of the financial services firm Guggenheim Partners, would become the controlling owner.

In any financial transaction, you have to ask who has the money. That's going to give you an indication of how the Dodgers will be run in the coming years. While a lot of people will have input into Dodgers decisions, there is only one person who has final authority. And that person isn't Magic Johnson or Stan Kasten.

And there's some talk about this deal being tripped up. But if it is tripped up, it will be for reasons that have nothing to do with Johnson or Kasten.

The first reason may be that procedures were bypassed. Originally the Dodgers were supposed to go up for auction between three finalists. However, reports indicate that Mark Walter came in and offered $2 billion up front. McCourt reportedly took the deal, since it was several hundred thousand dollars above what had been offered previously. Will Major League Baseball contest the deal and insist that the Dodgers proceed with the original auction plan?

The second reason that this deal may be waylaid is because of the sources of the money.

There was some concern among MLB officials about the financing of the Walter bid because some of the money was coming from insurance companies that are owned by Guggenheim. A person familiar with the baseball owners' teleconference Tuesday said several team owners voiced that during the call. The person spoke on condition of anonymity because MLB did not make any announcements.

"The problem there is a fundamental problem as you go into an auction, and that is the absolute reliance on other people's money," Ganis said. "It means a lot of regulators. It means either shareholders or, depending on which insurance companies it's coming from, the insured themselves."

So while sports talk callers prattle on about how Magic Johnson wants to win and how Stan Kasten has extensive baseball experience, the REAL decision-makers are looking at a completely different set of issues. Bear in mind that when Frank McCourt made his public statement regarding his decision to sell, Johnson and Kasten weren't even mentioned:

"This agreement with Guggenheim reflects both the strength and future potential of the Los Angeles Dodgers, and assures that the Dodgers will have new ownership with deep local roots, which bodes well for the Dodgers, its fans and the Los Angeles community," McCourt said in a statement.

The Los Angeles Lakers connection doesn't matter.

The Atlanta Braves and Washington Nationals connections don't matter.

The Guggenheim connection - THAT'S what matters.

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