The drama surrounding the bidding for the Miami Marlins intensified this past week, as a group led by Derek Jeter reportedly added $175 million in new funding from Texas tech billionaire Michael Dell.
We’re at the stage where the bidders are showing their hands when it comes to financing. Various media accounts have Jeter with the highest bid at $1.3 billion, with lower bids from Jorge Mas Santos and a group led by Wayne Rothbaum that includes former Florida Gov. Jeb Bush.
In Jeter’s case, his bid was boosted both by a reported commitment from and Florida money manager Bruce Sherman for $300 million and a recent deal with Dell, founder of Dell Technologies, to provide up to $175 million via MSD Partners. The MSD commitment was unusual, according to Gasparino, as it came in the form of preferred stock, “which will allow MSD to earn as much as 10 percent dividend if Jeter’s bid to buy the team is successful.” From Fox Business Network:
MSD is an offshoot of Dell’s family office investment fund, which manages his net worth, estimated at more than $20 billion that he accumulated largely through the eponymous personal computer company. In 2013, Dell Inc. was taken private by a consortium of private equity firms and other lenders, though Michael Dell himself is said to retain a 70 percent interest in the outfit.
While some people close to the deal say the Dell investment pushes Jeter closer to winning the Marlin’s bid, others are skeptical. MLB commissioner Rob Manfred and league officials must approve any transaction, and those officials are said to be wary about the use of debt or debt-like financing structures to buy a team, particularly one like the Marlins, which already has a significant amount of debt on its balance sheet.
Preferred stock, while considered a form of equity, also holds features that resemble debt. Like debt, preferred stock guarantees the holder a fixed payment either monthly or quarterly in the form of a dividend. Also in the case of bankruptcies, preferred shareholders are treated along the lines of debt holders in that these investments are paid off ahead of common stock holders when a business is liquidated.
Debt servicing has been a big issue in recent years for Major League Baseball, though at the end of the day there have been team purchases approved that didn’t meet debt guidelines. And another report minimizes concerns about debt servicing. From the New York Post:
Although preferred shares are technically equity, they also typically carry fixed cash dividends that are similar to interest payments on debt, and MLB has strict rules around the debt levels of teams.
Nevertheless, “MLB is not concerned at all,” the source said. “They have already signed off.”
With the commitments from Dell and Sherman, Jeter’s group would appear to have the edge in landing the Fish at a price of $1.3 billion. Mas, who at one point was considered the frontrunner, may end up coming short: his reported bid of $1.17 billion has changed in recent days after he began seeking additional investors and trimmed his personal financial commitment to the purchase. He also sought an exclusive negotiating window for the purchase — a condition rejected by Marlins owner Jeffrey Loria.
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