Tough position. I would talk to your friend and tell him you and the rest of your team would like to help him improve his game, showing him that you helping him would equate to him helping his friends and team mates in competition. If he rejects your offer, this states that he truly has no interest in improving his game, and, more importantly, helping his friends and team mates. I could then restructure the teams, as you suggested, with a clear conscious. Friendship certainly goes beyond competition, but as a friend, I would hope he would wish to take you up on the offer.
Good luck with solving this issue.