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March 13, 2012

Bizball

For Moorad, Backing Off On Padres Ownership Transfer Shows Votes Aren’t There

by Maury Brown

For Jeff Moorad, he has the option of looking at the glass half-empty or half-full. As the man that entered into an agreement with John Moores to purchase the San Diego Padres, getting the sale completed has been a perfect example of most matters in baseball’s “lodge” of owners move: glacially slow. In a case somewhat reminiscent of the Dodgers, Moores’s divorce from his wife precipitated the sale of the Padres. Since Moorad’s group didn’t have funding lined up 100 percent, the deal (in-principle) was to allow five years to get it all completed with $100 million for a 35 percent interest provided in 2009 and additional funds to push it to 49 percent in 2010.

But, there’s been a problem—one that money alone can’t seem to solve. Last week, the former super-agent, Diamondbacks owner, and current Vice Chairman and CEO of the Padres backed out of seeking controlling interest in the club to complete the $1.5 billion television rights deal for the Padres with FOX Sports.

“With Opening Day less than one month away, John Moores and I believe our top priority is to ensure that Padres fans will be able to watch broadcasts of what we believe is an exciting baseball team,” said Moorad. “I remain fully committed to the San Diego Padres and our fans and am looking forward to the 2012 season.”

“I have spoken with San Diego Padres Chairman John Moores and Vice Chairman/CEO Jeff Moorad,” said Commissioner Selig in a separate statement.  “They have informed me that Jeff is withdrawing his control transfer application of the Padres at this time in order to focus on completing the club’s local television contract.  I am pleased that John and Jeff are working on ensuring that the club’s games will be televised this season and beyond, and I know that they are acting in the best interests of Baseball, the franchise, and the great fans of San Diego.”

There’s one problem: the television deal isn’t the reason for Moorad pulling back; it’s because the votes aren’t there to approve the ownership transfer. This became clear at the last owners meeting in January when the vote to approve Moorad was pulled from the agenda. The Union-Tribune has reported that White Sox owner Jerry Reinsdorf and Ken Kendrick of the Diamondbacks are two owners opposed to Moorad owning the club.

For Reinsdorf, it may boil down to Moorad being a former player agent—something akin to letting the wolf into the henhouse. While Moorad was approved by MLB for ownership of the Diamondbacks as part of a group in 2004 where he was named General Partner and CEO, it’s possible that the White Sox owner was against the matter then.

The main difference now, however, may be Kendrick, who oversaw team operations while Moorad was with the Diamondbacks. Because of Kendrick’s presence, the league’s owners may be getting info into the day-to-day operations that, for one reason or another, casts doubt on Moorad being approved.

That approval aside, backing out in advance of the next quarterly owners meetings set for May 16-17 in New York to focus on the television deal puts the Padres ahead of “self.”

In nearly every conversation you have with league officials, what they want to see from every one of the 30 clubs is revenues flowing to player payroll to make them competitive as well as making capital improvements to the ballpark to increase club value. The Padres have done neither recently. According to Forbes, the club is heading in the wrong direction in terms of team value; revenues have been flat the last two years after a steep decline while, reportedly, operating income (a form of profit) has increased. This is something that isn’t likely to be sitting well with the owners.

Year

Rank

Value
 ($mil)

1-Yr Value
Change (%)

Debt/Value (%)

Revenue
($mil)

Operating Inc
($mil)

2011

19

406

0

49

159

37.2

2010

15

408

2

49

157

32.1

2009

16

401

4

60

174

22.9

Source: Forbes

 The television deal with FOX Sports moves the Padres in a direction which bodes well for Moorad. If the club behaves in the same fashion as the Rangers and Angels have with their new TV deals—albeit on a smaller scale (the Padres deal is $1.5 billion compared to $3 billion for the Angels and Rangers over the same 20-year life)—by investing in the club, then that helps Moorad. The broadcast deal could see as much as $40 million pour into the Padres coffers this year alone.

If Moorad and the Padres use those revenues to ink Carlos Quentin to an extension, that dovetails nicely with the reasonable five-year, $25 million deal that the club just gave Cameron Maybin. Throw in improvements to Petco Park, and Moorad’s chances of approval increase.

At the beginning, I said that Moorad could look at the glass half-empty or half-full. Moorad’s transfer deal with Moores is for five years. Moorad is at year threee. Remember, Reinsdorf and Kendrick do not account for 75 percent of the league’s owners. If the Padres move in the right direction by not only closing the television deal but by using the associated revenues that come with it correctly, Jeff Moorad will most likely wind up being the next owner of the Padres. Whether that’s this year or somewhere further out in the future is the only question.

Maury Brown is an author of Baseball Prospectus. 
Click here to see Maury's other articles. You can contact Maury by clicking here

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