The Yovani Gallardo dilemma: Trade, extend or stand pat

On January 19, 2015, the Rangers traded three prospects -- shortstop Luis Sardinas, reliever Corey Knebel and pitcher Marcos Diplan -- to the Milwaukee Brewers for righthanded starting pitcher Yovani Gallardo, as well as some cash that Milwaukee used to subsidize part of Gallardo's 2015 salary.  Gallardo was slated to be the team's #3 starter, ended up being the #1 starter when Yu Darvish and Derek Holland went down with injuries, and has exceeded all reasonable expectations, putting up a 2.62 ERA in 113.1 IP this season.

Alas, the Rangers season has been disappointing, and the All Star Break finds the team four games under .500, 6 games out of first place in the A.L. West and 5.5 games out of the 2nd Wild Card spot.  While the Rangers still have a shot at the playoffs, their chances are fading, and the front office finds itself with a hard decision to make on Gallardo, who will be a free agent at season's end:  do they extend him before he hits the open market?  do they trade him at the deadline?  or do they stand pat with him?

Trade Options

Okay, let's say that as July 31 approaches, the Rangers go on a losing streak dropping them out of the race, or the front office decides there are just too many teams ahead of them that they'd have to jump.  They are going into sell mode, with Yovani Gallardo being their most attractive trade chip.  What could Gallardo fetch?

Its hard to get a good read on what Gallardo could fetch because of the lack of good comparable pitchers who have been traded as rentals in recent years.  Gallardo isn't as good as Jon Lester, who was traded last year (and who brought back Yoenis Cespedes, which doesn't really help us for valuation purposes), nor is he as good as Cliff Lee, who brought Justin Smoak and Blake Beavan, among others, to the M's.  Jeff Samardzija was traded last year mid-season, but he had a year and a half left, and thus wasn't a true rental.  Gallardo also isn't considered a legitimate ace like Zack Greinke was when he was dealt at the deadline in 2012.

Really, the most comparable pitcher to Gallardo who has been traded at the deadline in his walk year is someone we'd all like to forget about -- Matt Garza.  Garza was 29 -- the same age Gallardo is -- and Gallardo's 3.61 ERA/111 ERA+ is right in line with Garza's 3.84 ERA/108 ERA+ heading into the 2013 season.  Garza had a 3.17 ERA and a 3.78 FIP in 71 IP in 2013 when he was dealt to Texas, while Gallardo is currently sporting a 2.67 ERA/3.51 FIP in 107.2 IP.  While the Rangers overpaid for Garza, the package of C.J. Edwards, Mike Olt, Neil Ramirez and Justin Grimm gives us an idea of the sort of return Jon Daniels would likely be seeking if he dealt Gallardo.

While Johnny Cueto, Jeff Samardzija and Scott Kazmir are also likely to be available in the next few weeks, there aren't a ton of sellers, and there are quite a few teams looking to upgrade their rotation.  Houston, in the playoff hunt for the first time in years, and with a strong farm system and a couple of holes in the rotation, would seem to be the most obvious trade partner.  Outfielder Brett Phillips would likely be the first name on the Rangers' list, although I don't know that Houston would part with him in a rental deal.  Assuming he's off limits, you might be able to make a package out of a combination of a righthanded pitcher -- Michael Feliz or Mark Appel -- and a 2014 college draftee hitter -- Derek Fisher or A.J. Reed.  Feliz and Appel are probably 51-100 range prospects this offseason, and Fisher and Reed are fringe top 100 guys.  That's the sort of package that would seem to be what Texas would shoot for from Houston.

The Dodgers are another team that is looking for pitching help, though their top-heavy system makes it harder to match up -- Corey Seager or Julio Urias aren't being dealt for a Gallardo rental.  If anything, the Dodgers are a team that seem to be using their financial might to faciliate deals, so if you wanted to get really creative, you could potentially talk about a Gallardo and Choo for Andre Ethier deal, with Texas kicking in some cash.  Texas doesn't get any prospects back, but they would, in that scenario, unload some financial obligations and swap out their underperforming platoon right fielder for the Dodgers'.

The Chicago Cubs, the Toronto Blue Jays and the Kansas City Royals are also teams that seem to be positioned to be aggressive in looking for starting pitching help.  Toronto has a surplus of young arms they could deal from, and I'm sure the Rangers would love to get Jeff Hoffman, but again, that's the level of talent that Toronto would seem unlikely to part with for a rental -- same with Daniel Norris.  Miguel Castro is the type of big-time arm the Rangers target, though, and could be part of a deal.  The Royals and the Rangers share a complex at Surprise and so there's a familiarity there that could help facilitate a deal, with injured lefty Sean Manaea being the type of player the Rangers would likely target.  I'm sure the Rangers would like to fleece the Cubs for a starter after how the Garza and Dempster deals have turned out, but I don't know how well the teams match up.  Local kid Billy McKinney, the outfielder who Chicago got as part of the Samardzija trade last summer, would seem to be who the Rangers would have at the top of their list as someone who they maybe could pry loose.

The abundance of buyers and the relative lack of sellers would help increase the price the Rangers could ask, but Gallardo isn't going to bring a game-changing return.  Gallardo's durability will help, but he's someone who slots in as a #3 starter in a playoff rotation, not a #1, which means looking at a guy in the 40-60 range as the key piece, most likely, not a top 10-20 prospect.

Extend Him

Okay, well, you can never have enough pitching, and Gallardo has pitched well here, he's a local guy, let's offer him a 3 year deal at $13M per year with a team option for a 4 year, and let's go home, right?

Except that sort of offer isn't even going to be in the ballpark.  Gallardo is going to be entering his age 30 season in the first year of his new deal, is having his best season, and has a track record of health.  We mentioned Garza as a comp for Gallardo above, but where the Garza comp breaks down is from a health standpoint -- Gallardo made 30 starts in 2009 and has made at least 31 in every season since then.  His clean medical history makes him more attractive in terms of committing money long-term.  Garza, on the other hand, had a shoulder issue that resulted in changing up the Rangers/Cubs trade, and had only made 42 starts in the two seasons preceding his hitting free agency.

Garza still got a 4 year, $50 million contract in the open market in the 2013-14 offseason with a fifth year option for $13 million that vests if he stays reasonably healthy over the life of the deal.

Also after the 2013 season -- Ubaldo Jimenez, coming off a career-best age 29 season (a year after putting up a 5.40 ERA for the Indians, and two years after putting up a combined 4.68 ERA for the Indians and Rockies), got 4 years, $50 million.

Ricky Nolasco, an innings eater who was coming off his age 30 season (and wasn't as good as Gallardo has been throughout his career), got 4 years, $49 million.

Notice a trend?

The numbers just went up last offseason -- Brandon McCarthy got 4 years, $48 million from the Dodgers, despite not being as good or as durable as Gallardo.  Ervin Santana, at age 31, and with a similar track record to Gallardo, got four years, $55 million.

And if I'm representing Gallardo, I'm pointing to James Shields as the best comp for my pitcher.  Shields hit free agency last year heading into his age 33 season, while Gallardo is three years younger at age 30.  But Shields put up a 3.72 ERA and a 111 ERA+ in nine seasons, consistently making 33-34 starts per year while putting up 200 innings plus.  Gallardo's 3.61 ERA and 111 ERA+ compare favorably with Shields, and while he doesn't average quite as many innings as Shields has over his career, if I'm repping him, I point out that Gallardo is three years younger, which makes him less risky than Shields.

Shields ended up signing a deal with the Padres that is backloaded and includes an opt-out after two years, but boils down to a 4 year, $75M deal with a team option for 2019 at $16M with a $2M buyout, meaning it has the potential of being a 5 year, $89M deal.

And Rick Porcello, as we all know, just inked a 4 year, $82.5M extension without even hitting the market -- he's younger than Gallardo, but didn't have the track-record pre-signing.

So if you are Gallardo, you are probably figuring that, if you stay healthy the rest of the way, 4 years, $50 million is your aboslute floor on the open market.  You're probably going to ask for something like 5-6 years at $20M to start, and plan on settling for 4 years at $16-18M per year, maybe with a fifth year vesting option.

Which means, if you are Texas, and you want to extend Gallardo now, you're probably going to have to do something like 4 years, $17M per year with a fifth year vesting option at $18M with a $2M buyout.

Which isn't unreasonable.  And you always need pitching.  But you have to ask yourself if you want to allocate your resources in that way, given the other pitchers you have in the organization.  Would you rather have Gallardo for the next four years at $17M per?  Or Nick Martinez in his spot in the rotation, with $17M to spend on something else?

Stand Pat

This, to me, seems like the most likely option.  The Rangers hold onto Gallardo, see if they can get back into the race with the hope that he, Martin Perez and Derek Holland can be a formidable playoff rotation if you get that far.  Offer Gallardo the qualifying offer (which he almost certainly rejects), continue negotiating with him (knowing that the QO depresses his market somewhat), and take the compensatory pick if he leaves.

Its also the least satisfying option, of course.  And that's part of what makes the job of Jon Daniels, Thad Levine, et al so difficult.