White Sox Re-Sign Jake Peavy for 2/$29M

Faced with a $22 million team option for 2013 or paying Jake Peavy a $4 million buyout and letting him hit free agency, the White Sox went with Door #3; re-sign him to an extension that lowers his annual payout but keeps him in Chicago through 2014 and gives them a team option for 2015.

The new deal is worth $29 million guaranteed, with a few million of that likely being a buyout of the 2015 option, so Peavy’s salary each year is probably going to be $13 or $14 million. Given his performance history, that’s a bargain if he stays healthy. Of course, with Peavy, that’s a bigger if than with most.

From 2008 to 2011, Peavy threw just 494 innings, or just 30 more than Rich Harden. He missed essentially half of each season from 2009 to 2011 with elbow pain, an ankle strain, and then finally a serious shoulder problem that required “experimental” surgery — really, it was more of an experiment in regards to baseball players, as it had been performed on other athletes before — in the summer of 2010 and shelved him for essentially a full year. Without the surgery, it’s possible his career would have been over, so he underwent what is now sometimes jokingly referred to as “Jake Peavy Surgery”, since his successful return shows that this can be an effective treatment for other pitchers who suffer the same injury in the future.

The surgery was deemed a success, however, and the surgeon who performed the operation has called the issue a “non-factor” for Peavy going forward.

And since coming back from the surgery in May of 2011, he’s pitched well enough to back up the doctor’s assessment. He’s made 50 starts, thrown 331 innings, and posted a 3.96 K/BB ratio that is the fourth best in the AL over the last two years — only Dan Haren, Justin Verlander, and CC Sabathia are ahead of him.

Problems with the long ball and an inability to strand runners in 2011 pushed his ERA through the roof, but his peripherals remained strong, and he went beyond regressing to the mean last year, posting a 3.37 ERA in the process. Overall, the swings between years have essentially evened out, as his career ERA-/FIP-/xFIP- line is an even 85/85/85 across the board. There’s no reason to think that Peavy is a pitcher whose results are going to differentiate wildly from his underlying skills, and those remain quite strong at the moment.

Even if we add in some age related decline — he will turn 32 next May — and bring him back to 5-10% above average in terms of run prevention, that still works out to a +3 win pitcher at 150 innings or a +4 win pitcher at 200 innings. Projecting him for 200 innings is probably too aggressive even though he threw 219 last year, but 160-180 is a fair expectation based on his track record and the fact that he hasn’t shown any ill effects since the surgery. If you’re optimistic about his health and performance, you might expect +7 wins from him over the next two seasons. A pessimist would probably be closer to +5 wins.

Either way, that puts this deal at between $4M to $6 million per win, or right about where the market has priced wins over the last few years. It’s not a huge steal, but getting market price wins for a quality pitcher on a short term deal is a pretty good move for a franchise attempting to win in the short term. The two-year term limits the White Sox exposure if Peavy gets hurt again, and at this AAV, they still afford to fill out their roster around him in order to make a run at the AL Central title.

Peavy’s lengthy medical records likely ensure that he’s never going to get a long term deal again, but he probably could have landed a three year contract for a little more money had he tested free agency. That the White Sox were able to keep him around without guaranteeing that third year makes this a nice first official signing for new GM Rick Hahn, as the team keeps their best pitcher in place without opening the organization up to long term problems if Peavy’s arm gives out again.