Pending Chicago Cubs Sale Comes with Financial Burdens

The Chicago Cubs were finally sold. This brings an organization that has been in financial stress for several months back to a level of stability, right?

Not so fast my friend.

The struggling Tribune Company, which is operated by CEO Sam Zell, agreed to sell the team and the rights to Wrigley Field for approximately $900 million. The buyer? Tom Ricketts, the chairman of Incapital LLC.

While this would seem to fix the Cubs financial situation, it may have made it worst.

It has been reported that in trying to secure this deal, Ricketts was declined financing for this on two different occasions. This ultimately tells me that this purchase was a reach for Ricketts, and that there is absolutely no way he is coming out of this acquisition in a financial stable situation.

First, Ricketts definitely overpaid for the organization. While the Cubs are probably one of the more profitable set ups in baseball due to their old stadium and the fact that the organization owns it, they still aren't as profitable as some of the higher-end markets, like Boston, New York and Los Angeles. In fact, in 2006, Forbes.com valued the Chicago Cubs at $448 million. Given that they were just sold for $900 million, that would suggest that the team's value has doubled in just 3 years.

Doubled? Really?

Maybe if these last 3 years had been an average 3 years I might not throw up at the suggestion that they have doubled in that amount of time. However, given that the economy has gone in the tank over the last 2 years, and the fact that the Dow Jones is down 28% since that Forbes.com evaluation, I would suggest that paying $900 million for the Cubs is about as stupid as some of the plays the Cubs have made on the field . An evaluation by Forbes.com this year list the Cubs as being worth $700 million. I think that's a reach, but that still means that Ricketts overpaid by $200 million.

Now that we've established that he has overpaid, we have to see how Ricketts is going to get himself out of the financial hole he has dug himself into. The Cubs have an operating income of about $30 million. I have no idea how much of the $900 million Ricketts had to finance, but chances are, it was a lot more than $30 million, probably at least 10x as much-if not 20x. If that's the case, it's going to take him maybe a decade to get this team out of debt, and until he does, that's all he's going to be thinking about. That means the team will likely raise ticket prices, insert more advertising, and they will probably limit their free agent spending over the next couple of years.

I'm sure Cubs fans will love that last part.

So think what you will of this sale, but if you ask me, this deal puts the organization in even more of a financial mess. Granted, at least now there is a light at the end of a tunnel instead of the end of a cave, but that light is very, very far away. And for a team that hasn't won a World Series in over a century, waiting certainly isn't what fans of the Cubs want their baseball team involved in.