Transaction Lab: Midwest Securities

Today we take a look at a pair of recent contract extensions shelled out by Midwest teams. After only one year as an every day player, the Twins took a leap of faith and signed Denard Span to a 5 year, $16.5 million contract with a $8.5 million net club option for 2015--what would be his first FA year.

Span represents the prototypical lead-off hitting center fielder. He owns a career .300/.385/.414 line, he's hit more triples (17) than home runs (14), he's walked in over 10 per cent of his PA's, and he's stolen 42 bases in 60 attempts (70% success rate). He's a solid at worst defender in center and a plus defender at the corners.

After trading Carlos Gomez this past off season, the Twins are basically committed to an outfield of Delmon Young/Jason Kube, Denard Span, and Michael Cuddyer for awhile. Their best prospect, Aaron Hicks, is an outfielder, but the Twins are being extremely cautious with him, sending him to single A for his third professional season (age 20). The Twins control Span's first year of free agency in the form of a club option, so while technically a contract extension, this is more of a risk/reward play than anything else. So, was it a good one?

Unless Span exceeds projected expectations, I think the answer is no. We'll take a look using the pre-FA extensions metrics (explained here).

Denard Span. 5 years, $16.5 million. VORC: $3.1 million. VOMC: $3.5 million. BFYBF: 0.19.

Actual extension:

 

 

Year-to-year:

 

 

Market rate:

 

 

Not that Span is any more prone to this, but if he breaks his leg and never posts another above-average season, he's still owed $16.5 million through 2015. For the assumption of this risk, the Twins gained about $3 million in surplus value. It's simply not a great trade off.

Minnesota's aforementioned trading partner, Milwaukee, also recently extended a young player in Yovani Gallardo. Gallardo has elite stuff, with a low-to-mid 90's fastball that features decent tail and good sink, two above-average breaking balls (a slider and a curve ball), and an average change up that he has thrown infrequently thus far. Last year he struck out 204 batters in 185 and 2/3 innings, but ranked second in the NL with 94 walks.

Going forward, Gallardo is a good athlete, which generally bodes well for control. He's also show good control in every other step of the way, so I view the 94 walks as an aberration (or at least a non-issue, long term). He's also 24 years old in 2010, which means he'll likely continue to improve. The Fans project a 3.83 FIP from Gallardo in 2010, but ZiPS projects a 3.69 FIP, CHONE projects a 3.62 FIP, and Bill James projects a 3.52 FIP. I'm inclined to side with the CHONE/Bill James end of the spectrum on this one.

Under the terms of the extension, Gallardo is owed $30.1 million through 2014 with a net $12.4 million option for 2015--what would've been his second year eligible for free agency. In addition to gaining a sense of financial certainty through Gallardo's arbitration years, the Brewers gain control of his first two free agent years. Let's take a look at how much money the Brewers saved.

Yovani Gallardo. 5 years, $30.1 million. VORC: $11.4 million. VOMC: $10.6 million. BFYBF: 0.38.

Actual extension:

 

 

Year-to-year:

 

 

Market rate:

 

 

When I first heard Gallardo was getting a 5 year deal (before I heard the salary amount), my back of the spreadsheet calculation/prediction was about $41 million guaranteed for the five years. VOMC confirms this, they saved about $10 million, making this one of the five or so best pre-FA contract extensions signed since November 1, 2009. The risk of a pitcher suffering a career ending injury is probably greater than that of a hitter, but if Gallardo stays healthy and as effective as I expect him to be, this deal is going to make the Brewers look very smart when it's all said and done.

SB Nation Featured Video
X
Log In Sign Up

forgot?
Log In Sign Up

Forgot password?

We'll email you a reset link.

If you signed up using a 3rd party account like Facebook or Twitter, please login with it instead.

Forgot password?

Try another email?

Almost done,

By becoming a registered user, you are also agreeing to our Terms and confirming that you have read our Privacy Policy.

Join Beyond the Box Score

You must be a member of Beyond the Box Score to participate.

We have our own Community Guidelines at Beyond the Box Score. You should read them.

Join Beyond the Box Score

You must be a member of Beyond the Box Score to participate.

We have our own Community Guidelines at Beyond the Box Score. You should read them.

Spinner.vc97ec6e

Authenticating

Great!

Choose an available username to complete sign up.

In order to provide our users with a better overall experience, we ask for more information from Facebook when using it to login so that we can learn more about our audience and provide you with the best possible experience. We do not store specific user data and the sharing of it is not required to login with Facebook.

tracking_pixel_9351_tracker