ONE TOPIC – TWO TAKES

By:  Holly Horning & Kurt Snyder

The Ilitch family has owned the Tigers for almost 24 years. And for the first time in a long time, the Tigers have professed a desire to take a step back and get the franchise to a more manageable level financially while acquiring more young talent at the expense of some of their stars. This all brings about a very important question.

Holly and Kurt never share their answers to these topics before it’s time. And today is no different as we take a look at the Ilitch ownership and what this change in direction may mean for the franchise.


Do you believe the Ilitch family plans to hold onto the Tigers after they make their changes? Why or why not?


HOLLY

If you follow media that is not Detroit-based, you will get a very different take on what is going on with the Ilitch family. A number of journalists are already using the name “Chris” instead of “Mike.” I won’t go into details that revolve around the owner’s health, but what we do know is that Mr. I hasn’t been seen in months including missing those very important team photos for both his Tigers and Red Wings, recent big player signings and last week’s significant joint venture announcement with Pistons’ owner, Tom Gores.

Whether or not you believe the rumors that the rest of the family is not as enamored of the Tigers as the patriarch, there is one huge reason why the family will sell the team. The estate tax bill.

Simply put, the Ilitch family will have to pay out 40% of the team value ($450 million) unless Mike leaves the team to Marian. Which, of course, he can’t because she owns a casino and is getting ready to launch another one. We all understand the rules that forbid MLB owners from being connected to gambling and bequeathing the team to Chris will spur the 40% tax, which is the primary reason why teams change hands.

It’s really as simple as that.

(On a side note, Mike can leave the Red Wings to Marian without an estate penalty because there are no gambling rules attached to hockey and he cannot sell to the Fords because NFL rules prohibit ownership of a baseball team.)

Additionally, as supporting points, you can also add in the huge cost overruns at the new Red Wings arena and the time and energy this massive project is taking away from baseball as part of a bigger rationale for selling the team.

Tom Gores is another factor and he’s stated his interest in owning another sports team. Based in CA, raised in MI and owns a home in Birmingham, he now has a joint business venture with the Ilitch family.

His behind-the-scenes actions, of course, were never reported in the local papers, but he recently hired a sports attorney who specializes in buying/selling sports teams. And the guy he hired is best friends with Steve Greenberg (Hank’s son) who works for…. get ready for it….Mike Ilitch.

And if you think this is a coincidence, I have a bridge to sell you……..

The Ilitches couldn’t sell to a better person who now holds a combined interest in the success of downtown sports and as a natural by-product, the industries that are Ilitch-owned and feed off of their baseball, basketball and hockey. An incredibly smart business move and a win-win situation.

So really the only thing left to determine is why the team has to reduce payroll. Is it because the Ilitches were told by MLB (1 of 9 teams) to reduce payroll because their debt-to-equity ratio is reaching dangerous levels? Or are they preparing the books to help bolster their sale price? Afterall, since at least 2006, the team’s payroll has exceeded revenue every single year.

I think we’ll soon find out.


KURT

Mike Ilitch has professed for so long how badly he has wanted to bring a World Series championship to Detroit, but that run is beginning to, well, run aground.

And the new direction announced by Al Avila to become younger and leaner is some real foreign territory for the franchise and for all of us. But we have watched the cracks form for a few years now.

We witnessed the departure of Dave Dombrowski, replaced internally by Al Avila. We stood puzzled by the retention of Brad Ausmus as manager, when it’s common place for a GM to put their own stamp on the team with a new skipper, especially when given the opportunity to hire a better one.

And bit by bit the cracks have widened, contributing to the Tigers’ decision to change course. Mike Ilitch has spent a lot of money, and considering there is no trophy to justify the spending, it’s time to stop the bleeding.

With Mr. I in poor health, Chris Ilitch is now making the appearances on behalf of the family, as recent as last week when the Pistons announced their intentions to move downtown and share Little Caesars Arena with the Wings.

Chris has been said to have much more interest in the operation and ownership of the Red Wings than the Tigers, which seems to be a huge red flag when you consider his father’s apparent decreasing role. Mr. I was the driving force behind every Tiger signing, every championship attempt. But it has reached the end.

I believe every move the Tigers make from here on out will be very calculated. Every move will be made in the interests of preparing the team for future sale.

Mike was all about a new ballpark in the infancy of his ownership, but never really moved on attempting to build a winner until 2004, the year after a historically bad year for the franchise. Then heavy spending seemed to be his strategy, which hasn’t been much of a strategy after all.

So, they will sell because it is time. They will sell because we need them to do it. We have reached the point where only new ownership can breathe new life into this team; ownership that doesn’t just blatantly throw money at a problem. Let the Ilitch family concentrate on what is clearly #1 now in their hearts; the Red Wings. That’s enough of a challenge as it is.

16 thoughts on “ONE TOPIC – TWO TAKES

  1. Great insight Holly into the tigers generational change. Just one question : how did the stienbrennrs keep the yankee’s in the family?

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    • Hi, Mike – It’s a great question. It’s because Steinbrenner passed away in 2010 – the only year with no federal estate taxes. His timely passing saved the team for his family and also saved them from paying out over $600 million in estate taxes. Thanks for keeping the conversation going! – Holly

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  2. The estate tax might well become a moot point soon. The Republicans are likely to eliminate the estate tax entirely. Will Mr. I still be with us when that takes place? If so, no worry about the estate tax likely. If not, then a very rapid sale would be in order since the estate tax rates are likely to be higher than any capital gains rates.

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  3. What everyone is forgetting is, Mr I can sell the Tigers to Chris way under market value to avoid the death tax penility. Family farmers do this now to avoid taxes, there are always work arounds.

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    • Hi, Mike – Unfortunately, Mr. I can’t sell the team to Chris unless Chris is willing to step away from Ilitch Holdings. As President and CEO of Ilitch Holdings, he oversees the casinos so he cannot be the Tigers’ new owner unless he either steps aside from his position (which he won’t do) or sells/divests the casinos from the parent company. The gambling aspect makes it much harder to keep the team in the family. Something’s gotta give. Thanks for continuing the conversation! – Holly

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  4. Very enlightening post! You’ve brought up points I hadn’t even considered. If the sale does take place, what happens to Leyland, Avila, Brad, & the rest of the crew? How are those contracts dealt with?

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    • Hi, Helen – Since no one has access to the contracts, I’m sure there are clauses that take into account change of ownership. Leyland doesn’t have a contract and Brad’s expires after 2017. It’s been rumored that Chris was the one who forced Avila to keep him for this last year because of ensuing changes and the unwillingness to pay 2 managers. Coaches are generally year by year and Avila has 3 more years on his contract but when all is said and done, he may only lose 1 year (if his contract is not guaranteed) once a sale and transition are completed. Great question – thanks! – Holly

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  5. It’s all second hand knowledge, but if what I am hearing from folks supposedly in the know, I don’t think I would want Chris Ilitch around any sports team that I support, be it the Tigers or the Wings.

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  6. Holly, I was hoping you were not going to suggest Tom Gores as someone who might buy the Tigers. I wasn’t happy with how he ran the Pistons for the first three years. I didn’t like that he was in California most of the time, either. You didn’t mention the Quicken Loans owner, Dan Gilbert. I’m hoping he will be the one to buy the Tigers.

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    • Hi, RKR – I didn’t mention Gilbert because he owns multiple casinos in MI and building in OH. He has expansion plans for gambling which is shown to be a huge money-maker. This would put him out of the running. Maybe Gores has learned some lessons from his early ownership? 😉 Thanks for continuing the conversation! – Holly

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  7. Thank you both for blogging on a topic of interest regarding the Tigers I’ve long suspected. Tom Gores? How about Derek Jeter? He wants to own a franchise. Imagine Jeter being principal owner of the Tigers?! A bold new world, indeed….

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  8. What a great piece you two have generated today. Totally appreciate Holly’s “inside info” and for publishing. Kurt’s total “dissection” of the topic was also excellent and has spurred great comments. You 2 keep hitting HR’s!😊

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  9. Interesting topic. Trading big contracts for prospects would also make the team attractive to a new owner. Lower expenses and fresh potential to mold a team in a new direction.

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