Welp, here we are again.

Last week, both PPA Tour (PPA) & Major League Pickleball (MLP) stakeholders communicated to me that the merger was a 98% done deal. And yet, I pegged it at 50/50. Why? Because I've seen enough to know that until the deal is done, it's not done.

And even still, both sides seem to be in favor of the deal and believe it will get done, but not without sorting through this latest twist.

So what happened?

As we've covered previously, the initial deal looked something like this:

• $70m to be injected into the merged entity (newco)
• $35m committed by the PPA
• $35m committed by MLP
• Of the $35m from MLP, Jason Stein (SC Holdings, NY Hustlers) and Al Tylis (DC Pickleball Team) were to contribute the majority
• The newco would be operated by PPA and their staff, with current MLP staff folded in

After various revisions, it was determined that the deal would look more like this:

• $70m to be injected into the merged entity (newco)
• $35m committed by the PPA ($15m cash, $20m in asset value)
• $35m committed by MLP, consisting of $10m from SC Holdings (Stein) and $10m from Tylis' group (with 25% liquidation preference), and rest split amongst the various ownership groups evenly
• As lead investors, SC Holdings & Tylis would also earn a 2% management fee and 20% of all profits
• The newco would be operated by PPA and their staff, with current MLP staff folded in

Eventually the 20m from Tylis and SC Holdings was whittled down to somewhere between $3 million and $6 million, a mere detail at this point.

But as the deal approached the finish line, Knighthead Capital Management (Knighthead), a firm founded by Tom Wagner, part of MLP's Vegas Night Owls ownership group, offered an alternative:

• Knighthead will serve as the lead investor instead of Tylis and SC Holdings
• Knightead will not charge the 2% management fee and 20% of profits
• Knighthead would reduce the liquidation preference from 25% to 23%

Understandably, many MLP stakeholders are considering the deal.

But some stakeholders believe that this isn't feasible. Tylis and SC Holdings already have an agreement in place with the Tom Dundon and the PPA, and could resort to litigation were this new arrangement to gain legs.

It's worth noting that Knighthead owns approx. 46% of English football franchise Birmingham City FC. As Wagner puts it, "the key in investing in distressed is to wait for the opportunities."

Tin foil hat: It wouldn't be the first time that Knighthead Capital Management, known for its prowess in investing in distressed assets, swept in to acquire control of a business that isn't exactly financially stable. The merger was on the doorstep of close, why blow it up with a slightly different offer? I digress...

But Wait, There's More!

While the newly proposed deal has stalled the merger, there are a myriad of other issues beginning to fester.

Player Compensation

It is reported that players' agents and attorneys have begun to press MLP executives on why players have yet to receive any compensation.

Well the answer is obvious: the deal isn't done and the cash has not been invested. It's not surprising that players haven't been paid, but that doesn't mean the players aren't getting impatient.

And notably, until the merger happens, all of the player agreements are with the individual entities (MLP & PPA), not the newco. As the merger took center stage, MLP payments to players took a backseat. But the original agreements were signed under the premise that MLP would be operating independently.

We're 18 days into 2024, which means 18 days of pay is owed to players, which means MLP is theoretically in default on all of their player contracts at this point.

The Talent

Some Major League Pickleball owners have wisely pointed out that PPA players aren't required to participate in all MLP events. This devalues the product.

As an example, Ben Johns has reportedly only committed to 6 MLP events. Notably, players can opt to swap PPA events for MLP events and vice versa post-merger. But that leaves question marks around which talent will be available.

Some PPA players aren't required to play in any MLP events.

Moreover, that means any upcoming draft still has plenty of question marks. Do you draft Johns with the #1 pick if he won't be at every event? Probably not.

The Deadline that Never Was

The stated deadline of January 31 is, as we guessed, completely arbitrary. There is no true deadline.

But the longer the deal remains in limbo, the less players will feel secure in their futures, and the more they'll start to ask questions and seek comparably stable alternatives.

As an example, Lea Jansen, who originally signed with MLP during the talent race, has now committed to the PPA. Why? Maybe because PPA can at least guarantee they will exist in a month from now. Side note: we don't know Jansen's personal motivations for the switch, so take this with a grain of salt.

The enticing agreements presented to players during the talent race were enough reason for many pros to make the full-time commitment, leaving behind their previous vocations. I'm sure at least some are beginning to question that decision.

Closing Thoughts

The general consensus seems to be that for MLP, it's merger or bust. There is no contingency plan. For MLP to exist beyond a failed merger, they'll need to come up with a plan.

The PPA will persist in either scenario, though it is noted that PPA executives indicate that the merger remains the best solution for all parties.

As always, we'll keep you updated via The Dink Newsletter, read by 100s of thousands of pickleballers everywhere, and right here at thedinkpickleball.com. PicklePod will be interesting this week.

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