The Halladay–Lee Blockbuster

So, it seems that the Blue Jays, Phillies, and Mariners have arranged a blockbuster deal where Roy Halladay will go to Philadelphia and Cliff Lee will end up in Seattle. The Phillies also get Mariners prospects Phillippe Aumont, Tyson Gillies, and Juan Ramirez, plus $6 million in cash from the Blue Jays. The Blue Jays get Phillies prospects Kyle Drabek, Michael Taylor, and Travis D’Arnaud (thanks to MLBTradeRumors.com for gathering the details from all the circulating reports).

This is quite a deal to break down, but I’ll try. There are only two major-league players involved, and both have one year left on their current deals before becoming free agents. Halladay will make almost $16 million and I have being worth around $17 million. Lee will make $8 million, and I estimate him being worth $15 million. Straight-up the Phillies don’t look so good here, but this is where the cash and prospects come in. I have recently developed a system for valuing prospects based on their minor-league performance. It’s complicated, and I will be explaining it in my forthcoming book (details on that to come), but it involves projecting the expected worth of minor-league players based on their performance. So, below, I have the expected value of the rights to all the players in the deal in millions of dollars. These values are crude, but they should get the job done.

Team		In	 	Out
Phillies	Halladay (1+)	Lee (7)
		Aumont (4)	Taylor (4)
		Gillies (2.5)	D'Arnaud (+)
		Ramirez (1.5)	Drabek (4)
		CASH (6)	
	Total	15		15

Blue Jays	Drabek (4)	Halladay (1)
		Taylor (4)	CASH (6)
		D'Arnaud (+)	
	Total	8		7

Mariners	Lee (7)	 	Aumont (4)
			 	Gillies (2.5)
			 	Ramirez (1.5)
	Total	7		8

Grand Total	30++		30

The pluses indicate that there is some unquantified value. For D’Audard, he is so low in the minors that I cannot adequately project his worth. He’s worth something positive, but it’s hard to say how much. For Halladay, the + reflects the value to the Phillies to being able to lock up Halladay before he hits the free agent market. This may net them a small discount as well as offers stability. Note that Toronto doesn’t loose this value, because he was not going to sign with the team. John Heyman is reporting that the Phillies and Halladay have agreed to a three-year $60 million deal, plus some vesting options. I have Halladay worth $55 million over that span to the average team—close to the actual contract—and because the Phillies are a good team he ought to be worth more. So, he seems to be getting a good deal and the Phillies may be getting a small discount.

In the end, all the teams are coming out about even, and of course all the GMs believe they are coming out ahead with a new group of players. I’m kind of surprised it worked out so neatly, especially with so much cash involved.

UPDATE: I just realized that I was estimating the discounted present values of the prospects and major-leaguers in different years’ dollars. I’ve corrected the error.

8 Responses “The Halladay–Lee Blockbuster”

  1. Tucker says:

    You seem to be undervalueing starting pitchers relative to the market. You gave the range for Lackey, but Lee and Halladay both pitched more and better over the last 2 years and all three are in their early 30s. If Lackey is worth around $15M it seems unlikely that Lee is worth the same and Halladay is worth only $2M more, especially taking into account that Halladay’s HR suppressing talents in a HR prone park and Lee’s low K totals going to the best team defense in baseball.

  2. JC says:

    I prefer to think that the market is overvaluing starting pitchers relative to my estimates. ;-)

    In all seriousness, starting pitchers is the one place where my estimates have been off in free-agent salary comparisons, on the low side. I designed my method to estimate fundamental values from baseball revenues, and after staring at the data for hours on end I’ve reached the conclusion that starting pitching is overvalued right now—call it the new market inefficiency.

  3. Peter says:

    Sounds about right to me, too. I don’t think there’s a clear winner here.

    Of course, if Drabek and Taylor do live up to all their potential, it probably ends up a steal for the Jays.

    I think Toronto did well to get two top prospects and a third legit one for one year of Halladay, even if they had to give cash and Halladay is signing an extension with Philadelphia.

  4. Devon says:

    I love this deal. Great breakdown here

  5. jfish26101 says:

    Taylor is being flipped for Brett Wallace from the A’s and is expected to be slotted in at 1B (if you factor in defensive adjustments).

  6. Kyle S says:

    Hi JC —
    Just wondering – how much do you know about financial option theory & pricing? Your estimates for the worth of the prospects seem pretty low – certainly lots of teams would pay more than $3 million for the right to employ Michael Taylor or Kyle Drabek, don’t you think? Without knowing your method it’s hard to say why that might (or might not) be the case, but it strikes me that a model that only looked at expected value of performance but did not also consider volatility (to use an option term) might underweight a high risk high reward guy like Mike Taylor. What are your thoughts?

  7. Carole Ford says:

    This seems like an incredibly good deal for the Phillies

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