Einhorn set to acquire NY Mets stake for $200 million

By Jennifer Ablan and Jonathan Stempel

NEW YORK (Reuters) - Hedge fund manager David Einhorn is preparing to buy a large minority stake in the New York Mets, a $200 million deal that could put him in a position to take control of the cash-strapped baseball team.

The president of Greenlight Capital is in exclusive talks with Mets ownership, led by real estate developer Fred Wilpon, and hopes to cement a final agreement by the end of June, both sides said on Thursday.

For Einhorn, whose flagship fund fell 3.4 percent in the first quarter, the investment appears to be a comparatively low-risk proposition, provided that he obtains protections from further losses that the team may face.

Wilpon told Sports Illustrated this month that the Mets were "bleeding cash" and could lose $70 million this year.

The team's principal owners also face a $1 billion lawsuit by Irving Picard, the trustee seeking money for victims of Bernard Madoff, to recover "fictitious profits" and principal from their dealings with the now imprisoned Ponzi schemer.

"There are all sorts of unknowns," said Andrew Zimbalist, a sports economist at Smith College in Northampton, Massachusetts. "A $200 million investment would help Wilpon hold onto the team, under a certain range of settlements with Picard. If the settlement with Picard is too high, Wilpon would have to sell control."

Forbes magazine in March estimated that the Mets were worth $747 million, down 13 percent from a year earlier. Wilpon told Sports Illustrated that the Mets have $427 million of debt, and would use $75 million of an infusion to pay it down.

Neither Einhorn nor the Mets would discuss possible terms for the proposed investment. Any investment needs approval by Major League Baseball. It is unclear how Einhorn would finance the entire investment or whether he might seek a partner.

"I have no real plans to sell this investment," Einhorn, a long-time Mets fan, said on a conference call with reporters on Thursday. "I expect to hold it for a very, very long time."

Einhorn added that "we're very far along in understanding the business operations and prospects."

Wilpon welcomed the investment. "David's investment immediately improves the franchise's financial position," he said in a statement.

Einhorn's investment could also be good news for owners of bonds sold to finance the Mets' home stadium, Citi Field. http://blogs.reuters.com/unstructuredfinance/

BIG PAYROLL, BIG PROBLEMS

The principals of Mets owners Sterling Equities, including Wilpon and Saul Katz, sought investors for a noncontrolling stake in the team after Picard filed his lawsuit, whose details became public in February.

Picard has said the owners were longtime Madoff investors who were "net winners" from the fraud, and ignored red flags that should have alerted them to Madoff's illegal activities. The trustee declined to comment.

If a deal with Einhorn were completed, the 42-year-old investor and competitive poker player would follow Philip Falcone, John Henry and James Pallotta among well-known hedge fund managers to invest in professional sports teams.

Einhorn, who also had a soft spot for the Milwaukee Brewers after having lived in that city, is committing his own money to acquire the Mets stake, and also appears in a prime position to take a leadership role if the Wilpons ceded control.(For a factbox on Einhorn please click on)

Zimbalist thought Einhorn could look for a provision giving him the right of first refusal to buy a controlling interest, and at a stipulated price.

"If I were Einhorn, and I thought the team would lose $70 million this year, then I would want to be insulated from any cash calls the team would pay its creditors, or else have the $200 million figure adjusted to reflect that," he added.

Einhorn has turned to a legal team well-versed in professional sports transactions. Bingham McCutchen corporate partners John Concannon III and Steven Taibl in Boston are leading a team advising Einhorn.

Despite having one of the biggest payrolls in baseball, the Mets remain in the shadow of the New York Yankees, and have not won a World Series since 1986. The Mets have had two straight losing seasons and have seen attendance drop sharply.

CLAWBACK

Einhorn made his name by warning about Lehman Brothers Holdings Inc's financial health before the investment bank's bankruptcy, and from a long-running battle with the management of Allied Capital Corp.

In recent years, his Greenlight Capital, with $7.8 billion under management, has emerged as one of the more influential hedge fund firms in the world.

Other hedge fund managers had emerged as potential buyers for the Mets. For a time it appeared the Wilpons were close to a deal with SAC Capital Advisors' founder Steven Cohen.

The Mets also own a majority of SportsNet New York, better known as SNY, which broadcasts their games. Time Warner Cable Inc and Comcast Corp also own stakes in SNY.

Einhorn maintained that his interest is in the team. "I'm not really interested in owning a TV station," he said.

Separately, Wilpon and Katz on Thursday filed papers seeking to move Picard's lawsuit against them to federal district court from bankruptcy court, saying it involves major questions of non-bankruptcy law.

Moving the case would allow the case to be tried before a jury. Two federal district judges have said Picard's clawback lawsuits against JPMorgan Chase & Co and HSBC Holdings Plc raise non-bankruptcy issues.

Madoff, 73, pleaded guilty in 2009 and is serving a 150-year prison sentence.

Einhorn had given a subtle hint about his interest in the Mets at the Ira Sohn Investment Conference on Wednesday, shouting "Let's Go Mets!" at the end of his presentation. He offered no explanation at the time.

During that conference, Einhorn also called on Microsoft Corp's board to oust the software company's chief executive, Steven Ballmer.

Microsoft shares rose 2 percent on Thursday.

(Additional reporting by Matthew Goldstein and Julian Linden; Editing by Dave Zimmerman, Gerald E. McCormick and Tim Dobbyn)