19 to 21…Hostile Takeovers

19 to 21…

Volume 9, #11, April 26, 2011

Hostile Takeovers

All of a sudden, it’s the 80s and 90s all over again. The heyday of corporate raiders, IPOs, red herrings, insider trading, stock swaps, billion dollar deals, and, yes, hostile takeovers. Even if Major League Baseball, and Bud.com’s, decision to take control of the Los Angeles Dodgers wasn’t exactly a hostile takeover, it sure sounded like it, especially since erstwhile Dodgers owner Frank McCourt is threatening to sue MLB and the used car dealer who runs same. However you want to characterize this move, it unquestionably is hostile in the extreme, since it appears as if Der Commissioner and his minions didn’t really bother to consult at length about the move with the Battling Bickersons, err, McCourts, before deciding to insinuate MLB into Dodger Stadium. So, even if it isn’t a situation where a group of stockholders wrest voting control of a publicly-held entity, it sure looked hostile.

As to how this eventually plays out, and what it means for MLB, that’s in the future, although the most interesting issues posed would be; 1) how much of a black eye does it give MLB to have one of its long-time (let’s say since the late 40s) signature franchises virtually dead in the water, and, 2) what does this mean for the New York Mets, who would seem to be in violation of baseball’s debt rules (to say nothing of possibly being on the hook in a whopper of a lawsuit from Bernie Madoff’s victims) and who have yet to be taken over by MLB? Wouldn’t that be a fine kettle of fish – TWO signature franchises, in the two largest media markets, in Dutch?

That might still happen in the future, but, around here, we’re more interested in the past, and the indisputable dictum that he who fails to learn from the past repeats the past. Not only is MLB not exactly famous for learning from the past, but, as you can probably guess, this whole mess isn’t exactly new. Sure, everyone remembers what happened when MLB bought the Montreal Expos in 2002 (and how that move continues to haunt the franchise, now located in Washington), but, if you go back into the late 19th and early 20th centuries, you’ll find that a league taking over a team is not unprecedented.

First, let’s go back to the Players League War of 1890. In effect, the serfs revolted in 1889; the players proclaiming their own Declaration of Independence, just 113 years after the original one. Tired of being spat upon and sat upon, the players revolted, and formed their own league in opposition and competition to the established National League and American Association. Although most of the better talent went to the Players League for the 1890 season, all three organizations attempted to carry on for the season in an over-saturated market. Fighting a losing battle against the law of supply (how many so-called major league teams there were) and demand (how many baseball fans there were in any one city), it was inevitable that there would be some casualties.

One of the most spectacular casualties was in Philadelphia, where three teams, the NL Phillies, the AA Athletics, and the PL Quakers wee doing battle. In fact, only in Philly were all three leagues going head-to-head. The Phillies (1883) and the Athletics (1882, in this incarnation) had been around for the better part of a decade, and the Quakers were thrown together for that one season. Yet, it was the Athletics that bore the brunt of the competition. Despite raids by both the other leagues, manager Billy Sharsig had patched together a surprisingly good team, led by third baseman Denny Lyons (194 OPS+) and pitcher Sadie McMahon (29-18, 115 ERA+). As late as July 17, they were still in first place with a record of 43-27. Although they had been in the pennant race the whole season, and would stay there through the end of the month, the Athletics were a financial mess, partly because of a diminished gate due to competition from the Phillies and Quakers, and partly because H.C. Pennypacker and William Whittaker, who were running the team, were paying themselves exorbitant salaries.

In the great tradition of MLB, the Association ignored the sea of red ink in Philadelphia until it was too late. Just two months removed from first place, the Athletic players threatened to strike over a little matter of not being paid (at least the Dodgers and Mets are still making payroll, thanks to a little help), whereupon Pennypacker and Whittaker released all the Athletics and the Association took over the team. Having waited until a disaster of nuclear proportions happened – a baseball meltdown – the Association rounded up a bunch of amateurs, semi-pros and other non-professional non-entities and sent them out on an extended road trip under Sharsig’s direction. With only 40-year old pitcher Ed Green sticking with the team after September 17, the Athletics lost their last 22 games, finishing 54-78. Although the franchise sort of survived for 1891 thanks to some questionable maneuvering that would put a Philadelphia lawyer to shame, and would put the team in the hands of the sleazy Wagner brothers, the Athletics were doomed (after the 1891 season), and the name, the first in Philadelphia baseball, wouldn’t be revived in the majors until 1901.

That revival, of course, involved the American League, and another baseball war that led to a league taking over a team. This time, it happened in Baltimore, and the villain was John J. McGraw. In bringing his American League to major league status after the 1900 season, Ban Johnson accepted some unsavory bedfellows, notably McGraw, of whom it has been said, had an unswerving desire not to be left holding the bag. Remember that, because it sure looked like McGraw was going to be left holding the bag after the 1902 season. As player/manager and a part-owner of the AL’s original Baltimore Orioles franchise, McGraw originally anticipated moving to New York with the franchise after the 1902 campaign – a development that seemed inevitable since Johnson knew very well his league needed a New York presence to succeed, and the Baltimore franchise was the best choice for relocation.

There was a little (about 5-7) problem with that scenario – McGraw. He and Johnson got along like Cubs and Cardinals; McGraw had the same regard for authority as the typical juvenile delinquent, and Johnson was the ultimate authority. In other words, Mac kept getting suspended for dissing Johnson’s umpires, and Johnson’s authority. And, they ended up hating each other’s guts. So, there was no way McGraw was going to New York with the Orioles after the ’02 season. So, he devised a little plan. Having previously met with New York Giants owner Andrew Freedman, McGraw met with the club directors of the Orioles, and demanded they either pay him the not-insignificant sum of $7000 they owed him, or grant him his outright release. He got the release, in exchange for his shares in the team, which were bought by director and part-owner John Mahon (who McGraw was in cahoots with). McGraw then traded his share of the Diamond Café to co-owner Wilbert Robinson for Robbie’s Orioles shares, while Mahon was collecting the shares of his son-in-law (O’s outfielder Joe Kelly) and another shareholder. When all the wheeling and dealing was done, Mahon owned 201 of the franchise’s 400 shares, and he turned them over to Freedman, who promptly released the O’s Joe McGinnity and Roger Bresnahan (who would sign with the Giants), plus three other non-Hall of Famers, leaving Baltimore with just five players. Oops! There was no Baltimore team. Blind-sided, Johnson declared the franchise vacant, assumed control for the league, and borrowed enough players from the other seven AL teams (at least he brought in major leaguers) to finish out the season. And they did. And finished last, and then moved to New York. Baltimore wouldn’t field a major league team again until 1954.

Just as happened in 1890 and 1902, nothing good has come from MLB taking over the Expos a hundred years later. To put it bluntly, they’re still lousy. To recall what happened in that fiasco…

In 2002, the Expos were taken over by Major League Baseball when that august organization purchased the franchise from Jeffrey Loria. This little gem was the end result of what sure sounded like a bunch of insider trading moves that began when the Red Sox were bought by a group led by billionaire John Henry, who was then the owner of the Florida Marlins. After buying the Sox, Henry sold the Marlins to Loria, who owned the Expos at that time, after which Loria sold the Expos to MLB, a deal that eventually ended the history of major league baseball in La Belle Province. Got all that? Expos fans certainly didn’t.

The final acts came after the 2004 season, when MLB moved the franchise to Washington and, in July 2006, when MLB finally found a sucker… or, make that buyer… for this orphan organization, selling the Nats for a grossly-inflated $450 million (Loria only got $120 million, which at least proves that MLB found a live one) to a group headed by Ted Lerner. That the Nats would go for so much is even more astounding when you consider that the team in 2006 was just as bad as it had been four years before, partly because the Expos/Nationals were so restricted financially by MLB. For instance, even though the team was in the wild card race in August 2003, MLB refused to allow it to spend money on expanding the roster with September call-ups.

To this day the franchise has yet to recover. Maybe Jayson Werth and Stephen Strasburg and Bryce “The Hype” Harper will change that…or maybe they won’t. But it’s pretty safe to say that little good has come from MLB taking over the Expos, (And that is without even mentioning playing a bunch of “home” games in San Juan.) just as little immediate good came from the takeovers of the Athletics and Orioles. But, isn’t that what you might expect from a hostile takeover?

If you’d like to subscribe to future issues of “19 to 21″—a subscription for the rest of the 2011 baseball season is $20 (only $1 per issue)—please e-mail me at JohnShiffert@mail.clayton.edu.