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The wrong kind of wheeling &
dealing
$3.5 billion offer a sad day
3/6/05 - By Mike Lee
Could things get any worse?
Imagine you're the NHL , then ask yourself that same question. After throwing
in the towel on the entire season two weeks ago, the league received a major
league slap in the face last week when an investment group from Boston offered
up $3.5 billion to take over ownership of the league itself and all 30 teams.
3.5 billion U.S. greenbacks is nothing to sneeze at considering the size of
healthy mergers and acquisitions in the business world, but this offer is more
along the lines of a hostile takeover.
Hostile, in that it comes at a
low point in the league's history, and an even lower point in Commissioner Gary
Bettmen's tenure as league Grand Pooh-bah. The offer is an indictment on the
shambles that the lockout and the state of the league.
If you use the
Forbes report as a baseline, the cumulative value of the 30 teams in the NHL
tallied just under $5 billion. That means Bain Capital Partners, and Game Plan
International, the two firms that pitched the proposal to the NHL last Tuesday,
opened the bidding at a 30% discount if you believe Forbes.
What Bain
and Game plan essentially did is offer the league to take over the league for
market value, but the league had to throw in the South East Division and parts
of the Atlantic and Central Divisions a gratis. Heck, most of those teams
aren't worth a dime anyway, so what the heck.
The offer, when divided
by 30, comes out to $116 million per team. Given that only six teams on Forbes
list were valued at less that amount, the offer reeked of death bed scavenging.
As it turns out, the offer was only an "initial feeler" thrown out by the
investment group, but it was a sad statement nonetheless.
Any
assiduous due diligence by the league would have headed off any such meeting
before it even took place. The fact that the offer was allowed to be leaked to
the media was either another blunder by the league or a gamble they hope will
continue to turn public sentiment in their favor.
Perhaps Bettmen and
his cronies believe that by positioning the state of affairs in such a sorry
light, fans will continue to side with the notion that the league is in dire
financial straights. If that's the case, then the league's state of affairs has
sunk to a new low.
Owners like Detroit's Mike Illitch, says that his team
has no interest in any such offer, but that's to be expected. Illitch's Red
Wings top Forbes list at $266 million, so a pittance of an offer for his
franchise obviously doesn't make much sense. The real question is, what amount
would jostle Illitch's attention?
If Bain and Game Plan were to come
back and pony up an amount that was able to distribute "fair market value" to
each existing owner, would the owners change their tune? The one given in big
business, is that any can be had for the right price.
Given that the
Mighty Ducks of Anaheim were sold for $75 million last week (a 32.5% discount
below Forbes valuation), then perhaps the offer was closer on the mark than it
would appear.
The offer as a whole makes no sense, unless the
investment group making the offer has an unlimited surplus of capital to burn.
Consider the fact that you still need to operate these franchises and the TV
money has all but dried up. But then, has anything made sense the past five
months in the hockey world?
Hey buddy, can you spare some change? I'm
trying to buy a professional sports league that is steeped in history and
tradition. No, I didn't day "team". I said "league". Blistery condition? No, I
said, "history and tradition". No, really. I'm serious.
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