2 days ago
Chicago White Sox Transaction Is A Dispute-In-Waiting
SUN VALLEY, ID - JULY 07: Jerry Reinsdorf, owner of the NBA's Chicago Bulls and the MLB's Chicago ... More White Sox, attends the Allen & Company Sun Valley Conference on July 7, 2015 in Sun Valley, Idaho. Many of the world's wealthiest and most powerful business people from media, finance, and technology attend the annual week-long conference which is in its 33rd year. (Photo by)
Today's deal is tomorrow's dispute. Consider that in the context of news that longtime Chicago White Sox owner Jerry Reinsdorf has agreed to a multi-year transaction with Justin Ishbia and family. It paves the way for Ishbia to eventually - potentially - take control of the 125-year old American League baseball franchise.
The complex structure will see Ishbia contribute capital in 2025 and 2026. From 2029 through 2033, Reinsdorf will have the option to sell control to Ishbia. And in 2034, Ishbia will have the option to purchase control from Reinsdorf. Terms and valuation were not disclosed, though recent minority transactions valued the team at $1.8 billion.
PHOENIX, ARIZONA - FEBRUARY 16: (L-R) Phoenix Suns owners, Justin and Mat Ishbia look on during the ... More first half of the NBA game against the LA Clippers at Footprint Center on February 16, 2023 in Phoenix, Arizona.
After becoming a minority owner in 2021, Ishbia further increased his minority interest in February 2025 at the aforementioned $1.8 billion valuation. That move, widely misunderstood in the media, is fundamentally different than this transaction. Then, Ishbia acquired existing shares from other minority owners in search of liquidity. Now, Ishbia's funds will be used to "pay down existing debt and support ongoing team operations". Based on experience, that suggests Ishbia's 2025 and 2026 contributons will be deposited into team coffers in exchange for newly issued shares.
The reference to debt begs a question: why do the White Sox have debt that requires a cash infusion to service? Team payroll has shrunk dramatically in recent years, from $193m on Opening Day 2022 to $74 million on Opening Day 2025, per Cot's. Of course, lost revenue from the shortened 2020 season and the team's on-field issues may have had a cascading effect on cash flow.
But in sports, debt is often used to fund acquisitions or major capital expenditures. But Reinsdorf has owned the team since 1981, and the White Sox current stadium, Rate field, was built in 1991 and is owned by the State of Illinois. Renovations and administration are paid for by the State. The team's spring training facility, Camelback Ranch–Glendale, is owned by the City of Glendale, Arizona, and their facility in Boca Chica, Dominican Republic, had a second building and more classrooms added back in 2017.
CHICAGO, ILLINOIS - AUGUST 21: A general view during the third inning between the Chicago White Sox ... More and the Seattle Mariners at Guaranteed Rate Field on August 21, 2023 in Chicago, Illinois. (Photo by)
Reinsdorf has long sought a new stadium. And while there has been little progress despite years of effort, he and connected entities reportedly spent almost $45 million buying vacant lots near the United Center. There's also been turnover in the team's media rights; this season, televised White Sox games moved to the nascent Chicago Sports Network, owned in part by Reinsdorf, which has struggled to gain traction amidst a broader collapse of regional sports networks in the United States.
It's been reported that an impetus in the deal is succession planning. But Reinsdorf is 89; given the long runway and the team's statement, let's call this transaction what it is first and foremost: a capital injection. And if the team needed cash, convincing minority owners to provide it at premium valuations can be difficult without the lure of controlling interest. Ishbia agreed, but on the condition that he'd have a path to control, a smart insistence.
Without Reinsdorf's consent, the soonest Ishbia can take control is 9 years. That's an eternity, especially in professional sports, where one great season, even one headline, can fundamentally alter franchise values. I still recall a sports banker suggesting in 2020 that the sign-stealing scandal could affect team sales.
But there are other demand shocks that can be more permanent. The White Sox are currently in the American League Central division basement. But they have a promising farm system, ranked as high as number 2 by some outlets. What happens if they start winning games? Such a turnaround was a factor in a dispute over another multi-year transaction; Glen Taylor's sale of the Minnesota Timberwolves and Lynx to Alex Rodriguez and Marc Lore (I wrote about its brilliance here).
Then there's labour negotiations. Major League Baseball's Collective Bargaining Agreement expires in December, 2026, and uncertainty abounds; a lockout could depress team values, while the installation of a salary cap, which existing owners may pursue, would likely have the opposite impact.
ORLANDO, FLORIDA - FEBRUARY 10: Major League Baseball Commissioner Rob Manfred answers questions ... More during an MLB owner's meeting at the Waldorf Astoria on February 10, 2022 in Orlando, Florida. Manfred addressed the ongoing lockout of players, which owners put in place after the league's collective bargaining agreement ended on December 1, 2021. (Photo by)
How is Ishbia going to react, in, say, 2032, if 96 year old Reinsdorf signs long-term and/or high-value contracts that will be Ishbia's responsibility to pay? And Reinsdorf's age is (unfortunately) worth highlighting for other reasons. Even the smartest estate planning, the most well crafted wills, can be thrown into chaos, a situation the San Diego Padres and Denver Broncos know all-too-well. What happens if a new owner inherits the White Sox before any of the options vest?
And if Reinsdorf can bequeath the team to someone else, can he sell it to someone else? Options are a choice, and as the team's statement said, "there is no assurance that any…future transaction (with Ishbia) will occur". What happens if someone comes along and offers more?
Yes, multibillion dollar deals have reams of attorneys, with plenty of experience, to write ironclad, clear agreements to prevent post-transaction disputes. The Timberwolves and Lynx 'Equity Interest Purchase Agreement' stood up to scrutiny, after all, and credit goes to Rodriguez and Lore's attorneys at Wachtell Lipton (Ishbia reportedly chose to use Covington Burling).
But there was still a dispute. From experience, it's not atypical, and it usually happens out of the public eye. Resolution through mediation and/or arbitration costs money, it costs time, and it paralyzes the business. That's exacerbated in sports, where decisions on contracts, trades, draft picks, management and more need to happen quickly. There are limited examples of this structure being successful, though perhaps more are coming; David Blitzer has an option to purchase control of the Cleveland Guardians in 2028.
MINNEAPOLIS, MINNESOTA - DECEMBER 30: Co-owners Alex Rodriguez (R) and Marc Lore of the Minnesota ... More Timberwolves interact in the second quarter against the Los Angeles Lakers at Target Center on December 30, 2023 in Minneapolis, Minnesota. The Timberwolves defeated the Lakers 108-106. NOTE TO USER: User expressly acknowledges and agrees that, by downloading and or using this photograph, User is consenting to the terms and conditions of the Getty Images License Agreement. (Photo by)
These type of transactions may be good for sellers that want to maintain control. They may be okay for buyers that need time to raise money and/or want access to a scarce asset, especially if it has the best logo in sports. But for everyone else, the answer is murky. Fans wonder if their owner chose the best option, or just the one that kept them in control. Leagues are concerned about governance, especially as deadlines approach, part of the reason MLB insists on a single control person per team. And every stakeholder should be mindful of the impacts from litigation, especially once its publicized.
Is future litigation likely here? I don't know. But a lot can change over 9 years, and this type of transaction, especially in professional sports, lights a match.
