September 25, 2009 4:15 PM

The Cubs (Almost) Have New Owners. But Will the IRS Intervene?

Posted by Zach Lowe

A quick update on the never-ending sale of the Chicago Cubs: The end may actually be in sight after a federal bankruptcy judge Thursday approved Tribune Co.'s plan to sell the Cubs and the team's stadium, Wrigley Field, for $845 million to the Ricketts family. 

The sales process could be complete by mid-October after the Cubs briefly file for Chapter 11 protection and Tom Ricketts, the son of the founder of TD Ameritrade Holding Co., receives approval from three-quarters of Major League Baseball team owners, according to the Chicago Tribune. 

The sales process, which has dragged on for more than a year, provided work for so many different Am Law 200 firms that it's difficult to keep track. Foley & Lardner partner Mary K. Braza, longtime outside counsel to MLB, advised the Ricketts family on its successful bid, according to lawyers familiar with the deal. Braza declined to comment. A team from Nixon Peabody advised the Ricketts family on financing issues, the firm says. Peter White, the lead partner on the deal, also declined to comment, citing the fact that the deal has not yet received full clearance. 

Ricketts beat out a competing bid from a consortium of investors led by Leo Hindery and Marc Utay and represented by a team from Paul, Weiss, Rifkind, Wharton & Garrison and Dow Lohnes.

Blake Rubin, a partner in the Washington, D.C., office of McDermott Will & Emery, served as Tribune's lead outside counsel on negotiating the deal with a long line of interested bidders that at one point included Mark Cuban, the billionaire owner of the National Basketball Association's Dallas Mavericks. Rubin has also declined to comment. 

Sidley Austin partner Bryan Krakauer has been Tribune's lead bankruptcy counsel since the beleaguered media company filed for Chapter 11 protection in December. Howard Seife, head of the restructuring department at Chadbourne & Parke, is lead counsel to the Tribune creditors committee. 

Willkie Farr & Gallagher advised Major League Baseball and the office of MLB commissioner Bud Selig throughout the deal talks, according to John Longmire, a partner at the firm. Willkie helped the commissioner's office stay abreast of the offers and financing plans among the leading contenders for the Cubs, Longmire says. Selig indicated in court that the deal should gain approval from MLB's owners quickly, according to the Tribune. 

The Cubs plan to file a quick bankruptcy on October 12. The filing is a formality, bankruptcy experts told the Tribune, designed to assure the Ricketts family that creditors of Tribune's estate will not have a claim on the Cubs. 

One interesting side note: There is a concern among several tax law experts that the sale of the Cubs, as currently structured, runs afoul of federal tax laws. The deal is not technically a "sale" at all, or at least lawyers on the deal and the officials commenting publicly on it aren't calling it a "sale," according to this column on the topic in Fortune. Rather, they are labeling it a "tax-free distribution," one Tribune won't have to pay any taxes on if the company gets its way, according to Fortune. In essence, Tribune is claiming the deal isn't a true sale because--in part--the company will retain a 5 percent interest in the team. If the deal isn't a true sale, Tribune will be able to avoid about $300 million in tax payments on the sale proceeds, according to Fortune. That money will go to Tribune's creditors instead, the magazine reports.

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