The U.S. Bankruptcy Court in Wilmington, Del., on Friday evening approved the sale of the Los Angeles Dodgers and Dodger Stadium for $2.15 billion -- the largest price ever paid for a sports franchise -- to Guggenheim Baseball Management, the group fronted by Lakers legend Magic Johnson.
The court gave its OK after a long, exhausting day that was much more contentious than even the judge had expected. Although some issues were resolved in advance — such as Fox Sports' need to know there is no secret media deal with the buyers — others required debate and rulings. Some cases could not be resolved.
Major League Baseball raised a number of thorny issues that could cause problems, and even with the bankruptcy court approval, MLB commissioner Bud Selig still must sign off on the deal. That may not come easily if what happened Friday is any indication.
Even so, Judge Kevin Gross declared that the sale agreement is in conformance with the bankruptcy code and gave his approval. The Dodgers expect the sale to be wrapped up on April 30.
“We are pleased to have successfully concluded the Chapter 11 reorganization process," the team said in a statement. "All the organization’s goals in the reorganization cases have been achieved. We look forward to returning all of our attention to Dodger baseball.”
Gross did retain the right to review a $150 million parking lot agreement between the buyers and outgoing Dodgers owner Frank McCourt.
To get the deal done, Guggenheim provided assurances to Fox that there is no side deal involving local TV broadcast rights to Dodger games and that Fox’s prime rival for those rights, Time Warner Cable, is not part of the new ownership group.
In a six-hour confrontation more heated than expected, MLB attorney Thomas Luria.said the league has “problems” with the deal. MLB has been seeking more information on the financing of the agreement, including how much money will be available for operations and how future TV revenue will be used or distributed. Despite mediation earlier in the day, some of those questions remain unanswered.
Luria said the buyers also have refused to fully disclose to MLB information that explains the real estate deal.
He said MLB feels as if the deal is being forced on it so McCourt can pay his $131 million settlement to ex-wife Jamie McCourt in time to satisfy the terms of their divorce agreement. Luria also said that the ongoing role of the mediator is a problem for MLB. In any case, he pointed out, the sale will not be final until Selig gives his blessing.
The Dodgers' attorney, Bruce Bennett. told the judge the buyers had met the requirements to have the deal confirmed by the court, that the deal had not changed since MLB approved it in a preliminary round, and that MLB is not entitled to the documents about future use of the parking lot because it’s not part of the bankruptcy. He did reveal that the lease on the parking lot is being extended from 25 years to 99.
Bennett speculated that MLB was making up issues, possibly because of residual bad feelings about McCourt, who has been accused by the league of "looting" $180 million from the team for personal use as the Dodgers floundered on the field,
During the long day, Gross also ruled that the Dodgers are not liable to Jamie McCourt to pay her divorce settlement. That is the responsibility of Frank McCourt, so her bankruptcy claim was denied.
An attorney for the creditors group said they are in favor of the sale but still do not think enough money is being set aside to cover all possible future claims. The judge ruled the $250,000 set aside is adequate.
Among those in the courtroom when Gross gave his greenlight were Frank McCourt, Johnson, Walter and Kasten.
The $2.15 billion price tag includes $1.6 million in cash and $412 million in debt. that will be assumed by the new owners.
Chicago-based Guggenheim Partners, a privately held global financial services firm said to have more than $125 billion in assets under management, is leading the deal. (Guggenheim also is an owner of New York-based Prometheus Global Media, parent company of The Hollywood Reporter.) Among those in the buyers group is former Sony Pictures head Peter Guber.
The person taking the lead on behalf of Guggenheim is CEO Mark Walter. Stan Kasten, who has had success running MLB's Atlanta Braves and Washington Nationals and the NBA's Atlanta Hawks, will run the Dodgers as president and CEO. Johnson is expected to take an active role on the business side and serve as the face of the team in the community.
McCourt bought the team from Fox in 2004 for $430 million in a highly leveraged deal that saw him put down zero of his own money. He's expected to make a handsome profit from the sale and will share in the profits through the side deal with Guggenheim should the land be developed for uses that could include housing or retail.
Local TV rights to Dodgers games are held through the end of the 2013 season by Fox, which has an exclusive negotiating window through November. The new owners could attempt to sign a new deal with Fox or perhaps Time Warner -- which is launching a new cable channel with the Lakers as its centerpiece and would love to have the Dodgers for summer programming — for as much as $4 billion, Or, they could launch their own network, like the New York Yankees did with their now-lucrative YES network.