Saturday, April 03, 1999

Limiteds step up to buy Reds

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Schott will fight takeover by Lindner

BY GEOFF HOBSON
The Cincinnati Enquirer

Carl Lindner

        A core of Cincinnati Reds limited partners stepped up Friday to buy control of the team from Marge Schott, The Cincinnati Enquirer has learned.

        Cincinnati financier Carl S. Lindner, Wall Street investor and Northern Kentucky native William Reik, and Cincinnati businessman George Strike apparently have bought the team Mrs. Schott has controlled for 15 years.

        Mrs. Schott was told Friday that a group of her partners had exercised their right of first refusal and matched Cleveland lawyer Larry Dolan's $65 million offer to buy 5.5 of her 6.5 shares, said a source who spoke on the condition of anonymity. Those 5.5 shares include controlling interest of the club.

        The limited partners reportedly have yet to work out a new organizational structure.

        Mrs. Schott plans to fight the limited partners' match, sources said.

        Mrs. Schott bought the team in December 1984, saying it was her Christmas gift to the city of Cincinnati. But her time as owner has been marked by controversy, and she is now serving a second suspension imposed by Major League Baseball for making insensitive racial remarks.

        MLB has set a June 30 deadline for her to sell the club.

        Paul Dolan, Larry Dolan's son and spokesman, had no comment. The six limited partners or their representatives either had no comment or couldn't be reached. Mrs. Schott declined to comment.

        Mrs. Schott's role in the new partnership is unclear. She would retain one share of the team and some ceremonial rights, which she had made part of the Dolan deal, ranging from a stadium office to field access to ownership of seats and a box.

        But Major League Baseball has to approve those perks, and it's not certain whether a matching offer applies to both money and provisions of the deal.

        “She feels hurt and deceived,” said a source close to Mrs. Schott. “Here's a 70-year-old elderly lady and her efforts to bow out gracefully through keeping the team in the hands of the everyday fans and family. (She) feels someone is trying to pull the rug out from under her.”

        The Enquirer reported Friday that although the Dolan deal was still on the table, Mrs. Schott had reached an agreement to sell her shares to another group. That group included her cousin, investment banker Steve Schott.

        Entering into a new deal with Steve Schott indicated that Mrs. Schott doesn't think Mr. Dolan's offer still applies, so the limiteds might have nothing to match.

NEWEST BUYERS

These three limited partners intend to buy controlling interest in the Reds:   Carl S. Lindner, chief of American Financial Corp., is one of America's great up-by-the-bootstraps stories. Two weeks shy of his 80th birthday, he is Cincinnati's most respected and richest corporate citizen. After dropping out of high school to work at his father's dairy, he became one of the nation's most famous billionaires.   William Reik, a Wall Street investor, is a Northern Kentucky native, graduating from Highland Heights High School and the University of Kentucky Law School. He is managing director of William D.Witter Inc. in New York. After growing up a Reds' fan in Fort Thomas, Ky., he worked for seven years to get into ownership when the call came from Marge Schott on July 8, 1985.   George Strike owns Cincinnati-based American Laundry Corp. In 1992, Strike called for Schottto be barred from baseball for life if she had made racist remarksattributed to her. Until recently, he served as chairman of the University of Cincinnati board of trustees.

        When the Dolan deal was presented to them March 8, the partners themselves argued that Mrs. Schott didn't have a real offer from Mr. Dolan, because it was contingent on Mr. Dolan working out a deal with the limited partners. Mrs. Schott then agreed to a deal with Steve Schott.

        With the 30 days the limiteds had to match the Dolan offer running out next week, they opted to avoid complications and match.

        A Major League Baseball source said the partners' initial response won't hamper their decision to match the offer.

        “As far as we know, she has a deal with Mr. Dolan and the limiteds have the right to match,” the MLB source said. “She has signed a deal with Mr. Dolan and we have seen nothing from Steve Schott.”

        Friday's move pushes Mr. Dolan, the Cleveland attorney who tried to craft a joint partnership with the limiteds, out of the deal. Mr. Dolan had planned to put former Cleveland Indians executive Dan O'Dowd in charge of an organization modeled on the Indians' success.

        Ever since four Reds partners matched Washington, D.C., businessman Jon Ledecky's bid to buy a share of the team last fall, Major League Baseball had expected Mr. Lindner and other limiteds to keep the team. If the Steve Schott deal ever comes before the limiteds, Baseball expects them to match that bid, too.

        Cincinnati philanthropist Louise Nippert joined Mr. Lindner, Mr. Strike and Mr. Reik in matching the Ledecky offer.

INFOGRAPHIC

Timeline of Schott Era (120k)

        None of the partners is expected to run the team on a daily basis. Managing Executive John Allen and General Manager Jim Bowden are held in high regard by the limited partners.

        Mr. Allen couldn't be the control person — attending owners' meetings, consulting with Major League Baseball and having final authority over the team — because he doesn't have a financial stake. Mr. Strike and Mr. Reik frequently have been mentioned as possible point men. But as the partnership evolves, younger names are expected to surface.

        Cincinnati businessman William O. DeWitt Jr., the principal owner of the St. Louis Cardinals, as well as Tom Williams, son of former Reds owner William J. Williams and minority shareholder in the Cardinals, could have discussions with the new group about running the Reds.

        To get MLB approval, the limited partners must choose a person to control the team and a day-to-day leader, as well as show Major League Baseball how the purchase will be financed.

        That's important, because Baseball wants the Reds to kill the limited partnership that would expire on Dec. 31, 2000. MLB would like to see a more conventional corpo rate structure, and the new group would have to address that before being approved.

        One MLB source familiar with the ownership process said the Reds deal could take two months to a year to be resolved, depending on Mrs. Schott's stance and the consensus of the limiteds.

        Among the limited partners is Gannett Co. Inc., which owns the Enquirer as well as one share of the Reds. Gannett corporate officials couldn't be reached for comment Friday.

        Mr. Lindner has had a long history with the Enquirer, at one time as publisher before selling the newspaper to a company that later sold it to Gannett. Mr. Lindner's Chiquita Brands International and the Enquirer recently were embroiled in a legal dispute over articles published by the Enquirer on Chiquita's business practices. The newspaper renounced the articles, apologized to the company and paid Chiquita more than $10 million.

        The other limited partner, Carl Kroch, died last month and his share is owned by his estate.

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