David Einhorn shakes hands with Mets third baseman David Wright earlier this season.NEW YORK — The deal died inside a midtown Manhattan office building, where this morning Mets CEO Fred Wilpon and hedge-fund titan David Einhorn officially ended talks that would have allowed Einhorn to purchase a $200 million stake in the team.
At the center of the dissolution was the issue of majority control of the franchise, which the Wilpon family did not wish to concede. Einhorn wanted to be pre-approved by Major League Baseball as the controlling owner of the franchise should the Wilpons’ financial fortunes take another tumble. With all deals nixed, that provision is no longer necessary.
Though a news release insisted the Wilpon family "has provided additional capital to cover all 2011 losses," the franchise must grapple with the ramifications of their involvement in the Bernard Madoff Ponzi scheme scandal.
Team officials insist any financial issues have yet to hamper the on-field product, and will not impede their ability to sign any future free agents, such as the team’s shortstop, Jose Reyes.
Still, the Mets will continue their search for an infusion of cash as they await a decision in the claw-back lawsuit brought forth by Madoff trustee Irving Picard. After their experience in these most recent negotiations, the Wilpons will alter their strategy and seek smaller partners willing to buy stakes worth about $20 million each, according to people with direct knowledge of the team’s thinking who requested anonymity due to the confidentiality of any such negotiations.
The new plan, if successful, would help protect the longtime owners from losing control of the franchise. “We are very confident in the team’s plans — both on and off the field,” Fred Wilpon said in a statement.
The announcement today extinguished an exclusive negotiating window that began in May, dragged through the summer and left both parties bickering over what changed in their initial agreement. The deal reportedly would have lasted five years, with a provision that Einhorn could purchase a controlling interest in the team then if the Wilpons did not return his initial investment.
Einhorn, the 42-year-old president of hedge fund Greenlight Capital, said the Mets had altered the deal last week. "Given the extensive nature of the last-minute proposed changes, further negotiations would be pointless," Einhorn said.
Einhorn insisted his interest in the pre-approval as a potential majority owner was only insurance. To Einhorn, who earned acclaim for short-selling the investment bank Lehman Brothers, “it wouldn’t make sense to invest $200 million into a team” and then be denied the opportunity to later take full control should the majority owners leave the stage.”
After speaking with commissioner Bud Selig earlier this summer, Einhorn said Selig “assured me that (approval) would be no problem.” Einhorn indicated the Mets disliked the idea of a provision giving him a chance to possibly purchase a controlling interest in the team, but initially agreed to accept it. Einhorn’s attitude changed, he said, when he learned last week that the Mets had “lobbied MLB to remove this provision from our agreement.”
Officials within the Mets organization with knowledge of the deal disputed Einhorn’s characterization. Only the other 29 baseball owners could approve Einhorn. Selig does not wield that sort of power. “We couldn’t lobby baseball to change their policies anyway,” one official said.
Instead, team officials worried that Einhorn — despite numerous public denials — desired full control of the franchise. That led to their backing off of the deal. The Wilpon family favors control of their beloved franchise over all other considerations. They did not want their ownership to be compromised.
“At one time (the agreement) made sense,” a team official said. “And then it didn’t make sense.”
Inside the Mets clubhouse today, the reaction was muted. Manager Terry Collins spoke with team COO Jeff Wilpon during the day. Collins said he would not address his team on the matter. This was “business as usual,” Collins said. His players echoed that sentiment. “I don’t worry about anything that’s outside the field,” Reyes said.
As an organization, the Mets are not granted that luxury. A major deal between the franchise and one limited partner was destined to be difficult to consummate, according to Michael Cramer, a former president and minority stakeholder of the Texas Rangers and a professor at the University of Texas. Cramer called the proposed deal a “very hairy, very complex transaction,” loaded with a variety of “moving parts.”
Assembling a group of smaller stakeholders would be less complex, but still difficult to complete, Cramer said.
“There aren’t a whole lot of people who have $20 million to basically flush,” Cramer said. “And say, ‘I’ll have no say in the team. I have nothing to say about what’s going on. And yet I’m going to put $20 million in this team on the hope and the prayer that it’ll be okay.’ "
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Andy McCullough: amccullough@starledger.com
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