The Los Angeles Dodgers reached the final stage of an auction for the baseball team one day early after phone calls in which no rival topped the record $2.3 billion offer from a group led by Magic Johnson, people familiar with the sale said.
Dodgers attorney Bruce Bennett and Joseph C. Shenker, the lawyer for team owner Frank McCourt, late March 27 called off yesterday’s scheduled gathering of the bidders in the New York offices of Dewey & Leboeuf LLP, according to two people who were granted anonymity because the process was confidential.
When Johnson heard the news, he handed out autographed jerseys from the Los Angeles Lakers, the team where he won five National Basketball Association championships, emblazoned with the words “Go Dodgers,” a person familiar with the scene said.
Major League Baseball Commissioner Bud Selig said “the interest in this franchise and its historic sale price are profound illustrations of the great overall health of our industry,” according to an e-mailed statement yesterday.
“I believe that a man of Magic’s remarkable stature and experience can play an integral role for one of the game’s most historic franchises, in a city where he is revered,” Selig said.
One of the bidders, Stan Kroenke, who owns the National Football League’s St. Louis Rams and Arsenal of English soccer’s Premier League, didn’t submit paperwork that complied with bidding rules by the 9 p.m. New York-time deadline on March 26, one of the people said.
Kroenke’s representatives also expressed doubts about attending the in-person stage of the auction that had been planned for yesterday, the person said. In their last call with the Dodgers, Kroenke’s representatives relented and said they would attend, the person said.
Day of Calls
Work on the final stages of the deal began as early as 5:30 a.m. March 27. Throughout the day, Bennett and Shenker led separate calls with the three bidding groups, the people said. The third group was led by Steve Cohen, who runs hedge fund manager SAC Capital Advisors LP.
Many participants in Johnson’s bid hadn’t slept for 48 hours as they convened at Dewey & LeBoeuf’s offices to exchange documents with the seller, a person familiar with the sale said. McCourt’s representatives let it be known that they had asked retired federal Judge Joseph Farnan, who was overseeing the auction process, to come by, the person said.
Team Owners’ Call
Once the judge said he approved of the plan to end the auction, at about 10:30 p.m., members of Johnson’s group knew the team was theirs, according to the person. The winners, many of them exhausted, celebrated by going out for hamburgers, the person said.
Bennett is with the law firm Dewey & Leboeuf and Shenker is with Sullivan & Cromwell LLP.
One call on the afternoon of March 27 included all 30 of the team owners in Major League Baseball, held before they gave their approval to the final three bid groups. On that call, according to two people who participated, Farnan, who once served as the U.S. attorney in Delaware and a U.S. District judge in Wilmington, said he would monitor the final stage of the auction to ensure the process was fair.
At least one owner wanted to make sure Farnan would be in the room and listening to conversations between bidders and the Dodgers, one person on the call said.
The winning bid was more than twice the previous record paid for a U.S. sports franchise, the $1.1 billion developer Stephen Ross spent for the NFL’s Miami Dolphins.
Tripp Kyle, a spokesman for Guggenheim Partners, part of Johnson’s bid group, didn’t immediately return a call for comment on the process. Jonathan Gasthalter, a spokesman for Cohen, declined to comment.
Robert Siegfried, a spokesman for the Dodgers, declined to comment.
A legal representative of Kroenke’s team said that paperwork was submitted by the deadline and a representative would have attended the auction had one taken place, according to a person familiar with the matter who was granted anonymity because of the confidentiality of the sale process.
Johnson’s group also includes Hollywood producer Peter Guber, chief executive officer of Mandalay Entertainment Group and co-owner of the National Basketball Association’s Golden State Warriors, and former Atlanta Braves and Washington Nationals President Stan Kasten, who will relocate to Los Angeles and run the Dodgers.
Two years ago, Johnson, 52, sold his minority stake in the Los Angeles Lakers to billionaire Patrick Soon-Shiong, who was a member of Steve Cohen’s group.
McCourt may collect more than $1 billion from the transaction after paying off all the Dodgers’ creditors and his ex-wife, Jamie McCourt. The team listed total liabilities of $706 million, including $410 million in long-term debt, in its latest operating report filed with the bankruptcy court. McCourt must pay Jamie $131 million under their divorce settlement.
Johnson and his partners acquire one of the most storied teams in U.S. sports. The Dodgers broke Major League Baseball’s racial barrier in 1947 and, with the New York Giants 11 years later, became the first franchises to move to the West Coast.
The auction took place over several weeks and differed from the sale of any other Major League Baseball team, in part because it was overseen by Farnan, the retired federal judge. McCourt won that and other concessions from MLB as part of a settlement that ended a months-long bankruptcy court fight.
McCourt has until April 6 to make public details of the sale as part of the team’s bankruptcy-exit plan. U.S. Bankruptcy Judge Kevin Gross in Wilmington is scheduled to consider approval of the plan at a hearing April 13. The sale must be completed by April 30, the day McCourt is required under a divorce settlement to pay his ex-wife.
McCourt put the Dodgers into bankruptcy in June, claiming Selig forced the team into a cash crisis by rejecting a new contract with News Corp.’s (NWSA:US) Fox Sports, which holds the club’s television rights through the 2013 season.
Once under court protection, McCourt lost the support of the network when he tried to solicit bids for a new television deal earlier than allowed under the Fox Sports contract.
That plan was attacked by Fox, which claimed it would violate a no-shop clause in the current TV contract.
After mediation sessions with Farnan, McCourt settled his battle with MLB in November and dropped his effort to sell the television rights early in January. In return, Fox Sports agreed to support a quick sale of the team.
While based in Brooklyn, New York, the Dodgers became the first Major League Baseball team with a black player when Jackie Robinson took the field in 1947. They started play in 1884 as the Brooklyn Atlantics, and didn’t win their first championship until 1955. Even with devoted fans that lovingly called them “Dem Bums,” they joined the Giants in moving to the West Coast in 1958.
The Dodgers have won six World Series, tied for fifth-most in baseball. Five of them came in Los Angeles, where Duke Snider, Sandy Koufax, Steve Garvey, Fernando Valenzuela and Kirk Gibson led them to championships.
The case is In re Los Angeles Dodgers LLC, 11-12010, U.S. Bankruptcy Court, District of Delaware (Wilmington).
To contact the reporters on this story: Steven Church in Wilmington at email@example.com; Scott Soshnick in New York at firstname.lastname@example.org
To contact the editors responsible for this story: John Pickering at email@example.com; Michael Sillup at firstname.lastname@example.org