O's sale hearing turns into auction Bids by Angelos, DeWitt raise price to $148 million

judge to decide Aug. 2

June 23, 1993|By Ian Johnson | Ian Johnson,New York Bureau Staff writer Mark Hyman contributed to this article.

NEW YORK -- In a dramatic escalation of bidding for the Orioles, two groups of would-be owners turned a routine procedural hearing in bankruptcy court into a bidding war and upped the price of the club to about $148 million.

At the same time, Judge Cornelius Blackshear of the U.S. Bankruptcy Court for the Southern District of New York extended the bidding deadline from July 15 to Aug. 2. Closure on the sale could take place in early September, the judge said.

Whatever the final price, the Orioles' new owners will end up paying a record amount for a baseball team, exceeding the $125 million paid for the Seattle Mariners last year. However, the Orioles' sale price includes the team's operating profit for this year, expected to be more than $20 million, according to sources familiar with team finances.

The Orioles are for sale because owner Eli S. Jacobs is in personal bankruptcy, owing $175 million more to his creditors than he has in assets, including the Orioles. The New York businessman entered Chapter 11 bankruptcy in April. His creditors want the team auctioned off in bankruptcy court so they can recoup some of the money owed by Mr. Jacobs.

Yesterday's hearing was originally called just to discuss objections to bidding procedures, especially a proposal by Mr. Jacobs and the initial bidder, Cincinnati businessman William O. DeWitt Jr., that would pay Mr. DeWitt's group up to $3.25 million if his bid failed. A portion of that money would go to offset Mr. DeWitt's expenses in attempting to buy the team. Eleven days ago, Mr. Jacobs asked the court to approve the sale of the team to the DeWitt group for $141.3 million.

Yesterday, the DeWitt attorneys said the group deserved the fees because it did the groundwork in drawing up the contract with Mr. Jacobs.

At the opening of the hearing, an attorney for investors led by Baltimore lawyer Peter G. Angelos told the judge that the group was bidding $145 million for the club.

Soon after, however, the court broke for a five-minute recess that turned into a 90-minute huddle between attorneys for Mr. Dewitt and Mr. Jacobs. They returned to tell Judge Blackshear that Mr. DeWitt had agreed to increase his offer to $146.25 million and to cut his group's proposed fees to $1.75 million.

In addition, the DeWitt group asked that all bids be in increments of $100,000.

Judge Blackshear agreed to the arrangement, which meant that the next bidder would have to offer at least $148.1 million -- the DeWitt group's $146.25 million offer, plus the $1.75 million kill fee for the group, plus the $100,000 minimum increment.

Mark Friedman, an attorney representing the Angelos group, stood up and said his group would pay $148.1 million. The bid was not immediately submitted in writing to the court, but Mr. Friedman said it was firm and formally would be submitted shortly.

"From what transpired today, it would appear that the DeWitt side and our side mean business, and whoever else wishes to participate should be prepared for a very spirited bidding contest," said Mr. Angelos, who did not attend yesterday's court hearing.

"It's quite clear the bidding is not over. One might say it has just begun," the Baltimore lawyer said.

Attorneys for the DeWitt group declined to say whether it would top the $148.1 million offer.

Mr. DeWitt, who was not in court, was not available for comment.

Five groups have expressed interest in buying the team.

Doug Jemal, an owner of Nobody Beats the Wiz, a New Jersey-based chain of electronics stores, said his group hoped to submit a bid by the end of the week. But he acknowledged that he wasn't willing to go much more than yesterday's highest bid.

"Beyond $150 million, I'll let somebody beat us," he said, adding, "That's probably a number above which I would not go."

Jean S. Fugett Jr., chairman of TLC Beatrice International Holdings Inc., a former Baltimore lawyer and professional football player, also has said he'd like to buy the team. So has New York art dealer Jeffrey H. Loria. Neither could be reached for comment yesterday.

An especially contentious issue during the hearing was whether the $1.75 million fee would discourage other bids.

Lawyers for some of the groups wanted to know who would have made the best bid if, for example, the Angelos group were to bid $148.1 million, the DeWitt group were to counter with $148.2 million and the Angelos group countered with $148.3 million.

Judge Blackshear said that for the creditors -- who are trying to recoup some of their losses in court -- the best bid would be the DeWitt group's $148.2 million.

The reason: The creditors would receive more under the DeWitt bid, because the DeWitt group's $1.75 million kill fee wouldn't be subtracted from the bid.

Major League Baseball must approve the sale, but the judge dismissed requests that baseball officials be summoned to the court and forced to promise that they treat all offers fairly. Judge Blackshear asked the attorneys what penalty they proposed for baseball officials if they are unfair.

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