Padres and third baseman Manny Machado had some extension talks recently, to try to prevent him from opting out of his contract at the end of this season. Reports yesterday indicated the club was willing to tack an extra five years and $105M to his current deal, but Bob Nightengale of USA Today reports that was $145M short of his asking price.
Machado originally signed a ten-year, $300M deal with the Padres that affords him the opportunity to opt out midway through, after the fifth season. He will have five years and $150M remaining when that opportunity rolls around this fall. Given that he’s played at MVP-caliber levels, especially last year, he could certainly find a guarantee larger than that on the open market. It’s long seemed like he would lean towards triggering that opt-out and recently admitted that he does indeed plan to do so. With the extra five years and $105M, the club was effectively offering him a ten-year, $255M deal starting with 2024. Nightengale reports that Machado’s camp was seeking $400M over that same ten-year stretch, or an extra $250M on top of his current deal.
Given that massive gap between the two sides, it’s not surprising that a deal didn’t come together. Aaron Judge was coming off one of the best seasons in recent history and earned himself a $360M contract this offseason, one of the largest deals ever. That Machado and his reps are setting their sights above that range is quite ambitious, but also understandable. The player has the security of knowing that he has that $150M secured, even if he should suffer some kind of worst-case scenario such as a career-altering injury this year. That gives him the leverage to set a really high asking price since driving a hard bargain right now doesn’t create any risk of coming up empty-handed.
For the Padres, it’s not surprising that they balked at such an ask. They’ve been quite aggressive in recent years, including their previous deal with Machado, their $340M extension for Fernando Tatis Jr., $280M deal with Xander Bogaerts and others. However, the kind of deal that Machado was seeking would have been on another level.
In addition to the straightforward cash dealings to consider, they also have the luxury tax to think about. It was recently reported that the club’s competitive balance tax calculation places them narrowly below the third tier of $273M, with recent deals for players like Michael Wacha and Yu Darvish intentionally structured in ways that lower their respective tax hits. Going over that line would lead to increased taxation as well as their top pick in the 2024 draft being dropped by ten slots.
The CBT is calculated by the average annual value of a deal, not a player’s salary in a given season. Machado’s current deal comes with a $30M hit but the extension he sought would effectively turn the contract into a $550M deal over 15 years for tax purposes, combining the $400M he sought for the future and the $150M that he will have earned at the end of 2023. That would increase his tax hit to $36.67M, adding to the club’s tax hit and surely bumping them over that threshold.
Since Machado’s camp reportedly set a deadline of February 16 for contract talks, it seems that a deal won’t be coming together at this time. It’s always possible that the Padres come back with an offer strong enough to make him reconsider that position, but given their tax situation, it seems that things are aligned for Machado to play out the season and hit the open market again. He would be one of the top free agents in the class alongside players like Shohei Ohtani and Aaron Nola. The Padres could always re-sign him at that point, but they will surely have competition from other clubs around the league.
Machado’s tenure with the club has been largely successful. After not qualifying for the postseason since 2006, they’ve been there twice in the past three years. Machado launched 32 home runs last year and hit .298/.366/.531 for a wRC+ of 152. He produced 7.4 wins above replacement in the eyes of FanGraphs and came in second in the National League Most Valuable Player voting, trailing only Paul Goldschmidt. They have been aggressive this winter in adding free agents and seem poised for another strong season in 2023, but whether they can keep their star third baseman around beyond that remains to be seen.
