Don't let it get away!
Keep track of the stocks that matter to you.
Help yourself with the Fool's FREE and easy new watchlist service today.
Japanese baseball club the Rakuten Golden Eagles voted against the new posting system agreed to by Major League Baseball and Nippon Professional Baseball earlier this month, and with good reason. Just two years ago, pitcher Yu Darvish commanded a record $51.7 million posting payment, an amount that was bid by the Texas Rangers for the right to exclusive negotiations with Darvish. Under the old agreement, that posting payment was paid by the MLB club to the Japanese baseball club losing the player regardless of whether the player ultimately signed a contract with a Major League Baseball club.
Unfortunately for Rakuten, who posted ace Masahiro Tanaka yesterday, the new agreement caps the posting payment at $20 million, no longer allowing it to be competitively bid on by MLB clubs. Additionally, the NPB team only receives the payment if the player signs a contract with an MLB club, and the fee is now paid in installments.
Leveling the field
The agreement came about because MLB clubs wanted to limit the amount of the bids, hoping to give small-market teams the same shot as the Yankees and the Red Sox of the league to sign top-notch talent, and the NPB players union wanted their players to have their choice of teams instead of going to the highest bidder.
After being outvoted by the other Japanese teams on the new agreement with MLB, the Golden Eagles initially said they would hold on to Tanaka for the remaining two years the team controls his rights. Players in the NPB are not free agents capable of seeking contracts internationally until they've played for 9 years.
The team reconsidered, however, with team president Yozo Tachibana saying Tanaka had earned the chance to play in MLB. Tanaka was 24-0 last season with a 1.27 ERA, leading the Eagles to the Japan series title.
MLB clubs now have until 5 p.m. on Jan. 24 to reach an agreement with the star pitcher. If no agreement is reached, Tanaka cannot be posted again until after Nov. 1, 2014, and the Golden Eagles will receive no monetary compensation.
What can Tanaka expect?
Although $20 million may be lower than what Tanaka could have commanded via competitive bidding, it's still higher than the $16.7 million average posting payment for Japanese players over the years. Since 1998, when the last agreement between MLB and NPB was reached, just 10 of the 21 players posted have been signed to MLB contracts. Another three signed minor league contracts. Yu Darvish, now one of the top pitchers in the American League, set the high-water mark at $51.7 million, but the posting payment for Akinori Otsuka in 2003 was just $300,000.
Projections had Tanaka commanding a posting payment of over $50 million before the new deal was reached between MLB and NPB. While Rakuten gets the short end of the stick on this deal, Tanaka will benefit. Multiple media reports are suggesting he'll be offered at least $17 million per year. That's $7 million more a year than Yu Darvish agreed to just two years ago.
Want to figure out how to profit on business analysis like this? The key is to learn how to turn business insights into portfolio gold by taking your first steps as an investor. Those who wait on the sidelines are missing out on huge gains and putting their financial futures in jeopardy. In our brand-new special report, "Your Essential Guide to Start Investing Today," The Motley Fool's personal-finance experts show you what you need to get started, and even gives you access to some stocks to buy first. Click here to get your copy today -- it's absolutely free.