NEW YORK -- In a move that shakes up sports cable TV but won't change George Steinbrenner's role as The Boss, the New York Yankees and the New Jersey Nets signed a letter of intent to merge the two teams into one company.
The deal announced Thursday creates a new holding company, YankeeNets, that the teams value at about $1.4 billion. The baseball and basketball teams will remain as separate subsidiaries under their current leadership, with Steinbrenner running the Yankees, and Lewis Katz and Ray Chambers running the Nets.
"Nothing is going to change here," Yankees manager Joe Torre said.
Knowing the deal would fall in place and give the World Series champions increased cash flow made Steinbrenner comfortable to trade for Roger Clemens last week, according to a source with knowledge of the talks who spoke on the condition he not be identified.
When Toronto first talked about trading Clemens last fall, the Yankees showed little interest, with general manager Brian Cashman saying the payroll was at the maximum. The team didn't hesitate last week when the Blue Jays called again, even though the trade increased the Yankees' payroll to $88 million this year.
Based on early projections of their next TV deal, the Yankees' revenue in 2001 could approach $250 million, which will send a shudder through small-market teams, whose annual revenue is as low as $35 million.
"It's location, location, location," said analyst Bob Gutkowski, the former president of the Madison Square Garden Network.
Steinbrenner's spokesman, Howard Rubenstein, said the chief executive officer of the new holding company had not been determined. But Steinbrenner isn't know as The Boss for nothing, and he is expected to dominate Katz and Chambers.
The biggest change will be in television, with the new company expected to approach both Time Warner Inc. and The Walt Disney Co.'s ESPN unit about starting a new regional sports cable network. The Yankees' $486 million, 12-year contract with Cablevision System Corp.'s MSG Network expires after the 2000 season, and the Nets' contract with Fox Sports New York, another Cablevision unit, expires after the 2001-02 season.
"The announcement puts them in play in terms of third parties who may want to start a regional sports channel, give them a rights fee and an equity position," said TV analyst Neal Pilson, the former president of CBS Sports.
Steinbrenner had been in negotiations last year to sell the team, which with 24 Series titles is baseball's premier franchise, to Cablevision. But the deal fell apart when Cablevision chairman Charles Dolan wouldn't allow Steinbrenner total control of the team.
Steinbrenner, who led a group that purchased the Yankees from CBS Inc. in 1973 for about $10 million and owns about 60 percent of the team, then approached the Nets, who were bought last autumn for about $150 million, with Katz and philanthropist Raymond Chambers heading the group and comedian Bill Cosby a minority owner.
The deal announced Thursday values the Yankees at about $700 million and the Nets at about $150 million. About $550 million in cash will be contributed by new partners, such as the the investment bank Allen & Co. Inc., and the real estate company Tishman Speyer Properties Inc., according to a baseball official speaking on the condition of anonymity.
That money, the official said, could be used as partial financing for reconstruction of Yankee Stadium or a new Manhattan ballpark, or a new arena for the Nets, who would like to leave Continental Airlines Arena in East Rutherford, N.J., for a new facility in Newark, N.J.
Allen & Co., which is heavily involved in media deals, could eventually get a return on its investment from an equity stake in a new regional sports channel. Tishman Speyer, the landlord of Manhattan's Rockefeller Center, could get the construction contracts for new facilities.
Cablevision, which pioneered the regional sports business in the New York area with SportsChannel in the 1970s, put Steinbrenner in a quandary two years ago when, with financing partly provided by a division of Rupert Murdoch's News Corp., it gained control of both regional sports channels in the New York area.
Cablevision owns a controlling interest in Madison Square Garden, the NBA's New York Knicks, the NHL's New York Rangers, the MSG Network. Cablevision also owns 60 percent of FSNY, which has the broadcast rights to baseball's New York Mets, the Nets and the NHL's New Jersey Devils and New York Islanders.
One baseball official, speaking on the condition of anonymity, speculated Thursday's deal could cause Cablevision approach Mets co-owners Fred Wilpon and Nelson Doubleday about taking an equity position in that team.
"We congratulate the Yankees and Nets on today's announcement," Cablevision said. "Cablevision has enjoyed longstanding, productive relationships with both organizations, and we look forward to continuing those relationships."
ESPN, whose parent company owns baseball's Anaheim Angels and the NHL's Anaheim Mighty Ducks, is one logical partner for YankeeNets. One TV executive, speaking on the condition of anonymity, said Steinbrenner already had met with ABC president Robert Iger, who has ESPN in his corporate domain.
"We're always looking at the regional sports business," ESPN spokesman Chris LaPlaca said. "If presented with opportunities that make good business sense, we'll definitely pursue."
Time Warner, which owns baseball's Atlanta Braves, the NBA's Hawks and the NHL's expansion Thrashers, who start play this October, is launching a regional sports and entertainment network, Turner South, this October.
"We've had no discussions with this group about being a carrier, and it's our understanding there are certain incumbent rights," Turner Sports president Harvey Schiller said.
The board of the new holding company will include Steinbrenner, Katz and Chambers, plus Harold Steinbrenner and Stephen Swindal, Steinbrenner's son and son-in-law; Cosby; Lester Crown, a long-time Yankees limited partner; Tishman Speyer president Jerry Speyer; former Coca-Cola Co. president Donald Keough, the current Allen & Co. chairman; former Capital Cities-ABC chairman Thomas Murphy; real estate investor Jerry Cohen; and Rubenstein.
Steinbrenner, who was in Tampa, Fla., wouldn't comment on the deal, and Rubenstein said Katz and Chambers wouldn't speak, either.
Players were unconcerned with the corporate politics.
"I would venture should you go around the room, 98 percent of the players won't know what you're talking about," Yankees pitcher David Cone said in Tampa. "By and large, most players worry about their manager."