Chasing the Cubs

(Fortune Magazine) -- Back in 1981 the Tribune Co. bought the hapless Chicago Cubs for a bargain price of $21 million, prompting the Chicago Tribune's own sports columnist, Bob Verdi, to quip, "I don't know why we bought the Cubs. We already had a perfectly good company softball team."

Now, 26 years later, the team is still struggling on the field, naturally, but the Tribune Co., (Charts, Fortune 500) in the wake of its $8.2 billion sale to Chicago real estate king Sam Zell, is poised to offload the lovable losers - for a price that could exceed $1 billion. And observers say that if Major League Baseball commissioner Bud Selig has his way, John Canning Jr., CEO of Madison Dearborn Partners, will be the Cubs' next owner.

For those who spend more time perusing box scores than M&A deal books, Canning, 62, heads the Chicago-based private-equity firm behind last month's $5.7 billion purchase of Nuveen Investments and the recent $7.3 billion buyout of computer retailer CDW Corp. (Charts, Fortune 500) Any deal for the Cubbies, however, would be led by Canning personally, not Madison Dearborn.

In Selig's mind, Canning has three things going for him. He has deep pockets to buy the team, he has Chicago roots, and, as part owner of the Milwaukee Brewers (he'd have to sell that stake), he's already a familiar face to the league's owners. He's also a big fan: Before becoming a private-equity mogul, he was a young catcher who failed in a 1962 tryout with the Braves, then based in Milwaukee.

"I have enormous respect for John Canning, both as a person and as a businessman. But it's a process that will be fair and open," says Selig. "The Cubs are one of our treasures. It's a storied franchise with legions of fans all over. The only thing I would hope for is an owner who is very protective of the franchise and represents the city of Chicago well."

While Canning is considered the leading contender, closing the deal may not go as smoothly as a Tinker-to-Evers-to-Chance double play. That's because the team is being sold by a public company with a fiduciary responsibility to sell to the highest bidder. In contrast, when hedge fund trader John Henry bought the Boston Red Sox for close to $700 million in 2002, the seller was a public trust. Henry was not the top bidder, but he got the team because he was well regarded by Selig and team owners, who must approve any team sale.

The bidding will begin this summer and will probably stretch beyond the fall's World Series. The Tribune Co. has hired J.P. Morgan Chase (Charts, Fortune 500) to advise on the sale, and the key for the investment bankers is finding a potential owner who can pay top dollar yet pass muster with Major League Baseball.

Canning is said to be working with New York investment bank Allen & Co. and its managing director Steve Greenberg, who coincidentally is the son of Hall of Famer "Hammerin' Hank" Greenberg. Steve has an impressive baseball résumé himself, having played in the minor leagues for the Washington Senators after graduating from Yale. He also served as a deputy commissioner of MLB.

On June 14 the Tribune Co.'s advisors met with MLB officials in New York to begin the sale process. J.P. Morgan is putting together a deal book; interested parties must first apply to MLB, which will scrutinize financial records and conduct criminal-background checks before approving potential bidders.

A report recently published by Anderson Economic Group valued the Cubs at $600 million - a 34 percent increase in the past two years. But that means little, since there is usually a big disconnect between a team's economic value and its sale price - especially for a team as beloved as the Cubs.

The deal is expected to include Wrigley Field, the team's storied ballpark, and a 25 percent stake in Comcast Sportsnet Chicago. A billion-dollar price tag would be a record sale for a U.S. sports franchise.

Barring a turnabout this season, next year the Cubs will mark the 100th anniversary of their last World Series win. But inspiration lies in the Red Sox, which took just two seasons to banish 86 years of frustration after getting bought by a Wall Street heavy in 2002. In other words, Cub fans will do what they've always done: hope and wait.