The Work

May 16, 2011 6:30 PM

King & Spalding, Proskauer Handling $680 Million Sale of Houston Astros

Posted by Brian Baxter

Major League Baseball announced Monday that a sales-purchase agreement had been signed to transfer ownership of the Houston Astros Baseball Club from current owner R. Drayton McLane, Jr., to a group of investors led by Houston businessman James Crane for roughly $680 million.

McLane bought the Astros in 1992 for $117 million, with most of the money coming from his 1990 sale of the family-owned McLane Company, a food services and supply firm, to Wal-Mart. (Wal-Mart sold the company to Berkshire Hathaway in 2003). Having advised McLane on his acquisition of the team almost two decades ago, King & Spalding reprised its role as counsel to McLane and the Astros on the sale to Crane.

John Keffer, a corporate partner in King & Spalding's Houston office, is leading a team from the firm advising McLane that includes corporate partner Jaron Brown and counsel William "Pete" Musgrove, finance partner Margaret "Peggy" O'Neil, tax partner L. Wayne Pressgrove, employee benefits partner Eleanor Banister and counsel Donna Edwards, real estate partner Peter Oxman, and IP counsel Robert Neufeld.

King & Spalding recently handled the Astros' establishment of a new sports complex in the Dominican Republic, as well as an agreement last fall between the Astros and the National Basketball Association's Houston Rockets for a new regional sports network scheduled to launch next year. Included in the sale of the Astros is the team's share in the sports network--called Comcast SportsNet Houston--that will begin airing Rockets games in 2012 and Astros games in 2013. The sale of that stake could bring McLane an additional $93 million, bringing his total haul to $773 million, according to local news reports.

Crane, a former student-athlete and founder of a Houston-based logistics company, previously tried to buy the Astros in 2008. He emerged as the sole remaining bidder for the team earlier this month. Other bidders included New York-based investment firm Great Court Capital, according to a report last year by the Houston Chronicle.

The Am Law Daily reported Friday on the role of Proskauer Rose sports law group cochair Joseph Leccese, elected the firm's youngest-ever chairman last fall, in representing Crane in his quest for the Astros. The firm also advised Crane last year on his ill-fated attempt to acquire the Texas Rangers out of bankruptcy proceedings.

Another interesting wrinkle in Crane's acquisition of the Astros is the team's current lease with the Harris County-Houston Sports Authority, which manages the facilities for the Astros, Rockets, and National Football League's Houston Texans.

The sports authority's chairman is J. Kent Friedman, who assembled his own investor group seeking to buy the Astros should Crane's exclusive negotiating window to acquire the franchise fall through. Friedman, a former managing partner of Houston firm Kelly Hart & Hallman, joined Haynes and Boone in March. He's also the father of current Tampa Bay Rays general manager Andrew Friedman.

With the Rays in financial trouble in Tampa Bay--local papers recently reported that sister city St. Petersburg, Fla., was trying to hire Brown Rudnick in case the team files for bankruptcy to break its lease at Tropicana Field--media speculation has grown that Crane or another Astros owner might try and lure the younger Friedman, the architect of the Rays' recent rise to baseball prominence, to Houston. (Andrew Friedman has said publicly that his father's involvement with the ongoing Astros sale and lease negotiations has no impact on his current status with the Rays.)

Crane and soon-to-be-new Astros president George Postolos, a former Wachtell, Lipton, Rosen & Katz associate who now heads his own Houston-based sports consultancy, are likely to clean house and install executives that favor data-driven analysis, the Chronicle reports.

Former Manatt, Phelps & Phillips managing partner Steven Greenberg, the son of Hall of Fame hitter Hank Greenberg and managing director of boutique investment bank Allen & Company, served as McLane's financial adviser on the Astros sale. Greenberg is also advising the ownership of the New York Mets on a potential sale of a 25 percent stake in the team.

During McLane's tenure as owner, the Astros had one of the most successful runs in franchise history, qualifying for the playoffs six times and posting the fourth-best record in the National League. The team lost the 2005 World Series to the Chicago White Sox. McLane's sale of the franchise to Crane requires the approval of MLB and team owners. The process is expected to take four to six weeks.

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