Sportsnet: Two companies proposed to buy the NHL in yesterday's meeting

[Jarqui]

I would laugh my *ss off if the NHL did this franchise thing. Wouldn't you love to see that arrogant goon Goodenow's face if this went down !!! Priceless

Unfortunately, and just to be clear, I don't see this particular scenario as described at the top of the thread happening anytime soon because it would be difficult if not impossible to get 30 owners to all agree on it.

But it does have some interesting possibilities and there may be some other ways to approach it.

 

[ShippinItDaily]

So would all the owners have to give up their arenas in this deal as well? What about the ones that arent owned by the team and such?

Would this new corporation have control over each and every arena????

Because if they didnt couldnt some teams just keep their arenas, which are the big money makers anyways, and start a new league??

 

[me2]

So would all the owners have to give up their arenas in this deal as well? What about the ones that arent owned by the team and such?

Would this new corporation have control over each and every arena????

Because if they didnt couldnt some teams just keep their arenas, which are the big money makers anyways, and start a new league??

Arena rights would probably go with the team that owns/controls them.

[I can't think of a worse hockey idea than single entity controlled NHL]

 

[likea]

Not that it's necessarily an absurd notion. The concept could be a veritable goldmine if you were starting from scratch, not trying to separate 30 existing owners from their NHL playthings. One central owner for all 30 franchises, which do not compete with each other economically, would not require a collective bargaining agreement with the players. The terms and conditions of employment could be set and if the players didn't want to play in this league, they could go elsewhere, just like the WWE. Highly successful NASCAR is another venture loosely based on this type of centralized ownership concept.

please everyone, tell me how it can't happen, its illegal

the WNBA, MLS, Nascar all have systems like it

http://www.tsn.ca/columnists/bob_mckenzie.asp

 

[Isles72]

I thought I heard from bill watters that the nhl owners who ''wanted out'' would take their cash and run (aaprox 116 mil )and those who wish to stay will simply ''buy back'' their teams .

I'd love to put these player agents out on the curb via some centralized system

 

[Jarqui]

Arena rights would probably go with the team that owns/controls them.

[I can't think of a worse hockey idea than single entity controlled NHL]

This would very likely be a negotiable item but the deal would be contingent on them having this worked out. Given that these arenas are hard assets, the banks financing the deal wouldn't have a giant problem one way or the other because their money is covered to a decent extent by the real estate asset the arena represents. Half of them have an NBA tenant to reduce risk.

I saw an article (can't find it now but I believe that it was linked here) where it mentioned that the individual team prices would not be "average". The prices for each team would vary according to asset value, revenues etc.

Having slept on this, the really interesting moment for this structure comes if the WHA or something like it starts signing NHL players and trying to compete with the NHL. Notion of antitrust tend to go out the window because they do have local competition (though I belinve that with the 90% foreign make up of the NHL in the US and all the NHLers in Europe this year that position was already gravely eroded).

The way would be clear of antitrust at some point for the owners to restructure themselves into one corporation. So if the WHA or something like it gets going, the NHL owners could have their cake and eat it too.

The "free market" would exist between the WHA and the NHL and the rest of the world for the foreigners. The relative asset values of each team could determine shares in this new corporation. Revenues going forward could determine profit sharing/dividends - something like that. Caps, budgets and salary structures, linkage, etc with the players salaries are on the table to stay.

Goodenow as we know him today fades as a bad memory because some of his key union teeth get knocked out in this process (in the best case for Goodenow). Goodenow would be negotiating a union contract with the same rules as any other union with a company that now is clearly entitled to set salary structures and caps and a union with no ability to cry collusion and drastically reduced ability to cling to antitrust for it's survivial as we know it. The worst case for Goodenow is that the NHLPA is wiped out in the restructuring if the owners "start up from scratch" (a less certain or maybe more legally hazardous route).

It's ironic that the start up of the WHA could really help the NHL with it's labor problem.

I don't think the proposal the NHL heard during the BOG meetings was ever that seriously entertained but you can be sure that a big part of the pitch was the timely discussions/education of the merits of such a structure to deal with the labor problems. It is likely that this proposal was leaked purposely to shake the union and it's members. And it should because of it’s merits and possibilities.

 

[Boltsfan2029]

This would very likely be a negotiable item but the deal would be contingent on them having this worked out. Given that these arenas are hard assets, the banks financing the deal wouldn't have a giant problem one way or the other because their money is covered to a decent extent by the real estate asset the arena represents. Half of them have an NBA tenant to reduce risk.

What if the team doesn't own the building? You can't use something for collateral if you don't own it... Or am I misunderstanding what you're saying?

 

[Jarqui]

What if the team doesn't own the building? You can't use something for collateral if you don't own it... Or am I misunderstanding what you're saying?

If they don't own the arena (8 of 30 teams own less than 50% of an arena) they can make an addendum to the existing lease to assume the obligation for the lease of a team or haggle a new deal. The arena would not want to lose a pro sports tenant.

 

[Boltsfan2029]

If they don't own the arena (8 of 30 teams own less than 50% of an arena) they can make an addendum to the existing lease to assume the obligation for the lease of a team or haggle a new deal. The arena would not want to lose a pro sports tenant.

OK, thanks, I misunderstood. I thought you meant that the banks wouldn't be put off because they would have the buildings as collateral if the teams folded or were contracted.

I believe our lease automatically goes to whoever owns the team so transfer of the leasehold rights should be no problem if this type of deal were to happen. Which it won't, of course, but it's an interesting idea.

 

[Jarqui]

OK, thanks, I misunderstood. I thought you meant that the banks wouldn't be put off because they would have the buildings as collateral if the teams folded or were contracted.

I believe our lease automatically goes to whoever owns the team so transfer of the leasehold rights should be no problem if this type of deal were to happen. Which it won't, of course, but it's an interesting idea.

Technically, in a restructuring, the "team" named on the lease may cease to exist. The new corporation would just buy it's assets. Part of the reason for that would be to put Goodenow back to square one. A reason against it might be taxes (a very complicated subject where they'll need the equivalent of a Levitt to in corporate M&A tax to figure it out).

The point on the arenas just to be clear is that the banks who currently finance them with mortgages would probably love the deal. Risk for them goes down because they have their hooks into a giant outfit and the labor situation that has been killing the league is nailed down.

One other benefit of this for the small market teams is that they could improve their financing rates significantly because their risk as a borrower has also been substantially reduced tied into the big outfit with a labor cure. They'd save tens of millions in financing league wide. Those are numbers you don't see on Levitt's report that almost doubled their losses along with depreciation.

Forbes currently over values the league at 4.9 billion. The offer was for 3.5 billion. Let's assume a low ball offer was made and they're really worth roughly $4 billion. Forbes has been wrong so many times on the league valuation, it's silly. If they pulled this restructuring off, quite quickly, they would be worth closer to Forbes number because of the stability and predictability it would bring to the whole situation. There's probably a $1 billion valuation carrot for the owners out there for resolving this labor mess once and for all. That's what a very big part of this fight is about.

And before any pro NHLPA folks get too excited about that number, remember that the owners dumped $1.8 billion (operating losses) in to cover losses over the last ten years. It's nearly double that when interest and depreciation kick in (less big tax writeoff for the losses). I see it as they're recovering some nasty losses but it's a BIG recovery, isn't it ?

 

[SENSible1*]

This would very likely be a negotiable item but the deal would be contingent on them having this worked out. Given that these arenas are hard assets, the banks financing the deal wouldn't have a giant problem one way or the other because their money is covered to a decent extent by the real estate asset the arena represents. Half of them have an NBA tenant to reduce risk.

I saw an article (can't find it now but I believe that it was linked here) where it mentioned that the individual team prices would not be "average". The prices for each team would vary according to asset value, revenues etc.

Having slept on this, the really interesting moment for this structure comes if the WHA or something like it starts signing NHL players and trying to compete with the NHL. Notion of antitrust tend to go out the window because they do have local competition (though I belinve that with the 90% foreign make up of the NHL in the US and all the NHLers in Europe this year that position was already gravely eroded).

The way would be clear of antitrust at some point for the owners to restructure themselves into one corporation. So if the WHA or something like it gets going, the NHL owners could have their cake and eat it too.

The "free market" would exist between the WHA and the NHL and the rest of the world for the foreigners. The relative asset values of each team could determine shares in this new corporation. Revenues going forward could determine profit sharing/dividends - something like that. Caps, budgets and salary structures, linkage, etc with the players salaries are on the table to stay.

Goodenow as we know him today fades as a bad memory because some of his key union teeth get knocked out in this process (in the best case for Goodenow). Goodenow would be negotiating a union contract with the same rules as any other union with a company that now is clearly entitled to set salary structures and caps and a union with no ability to cry collusion and drastically reduced ability to cling to antitrust for it's survivial as we know it. The worst case for Goodenow is that the NHLPA is wiped out in the restructuring if the owners "start up from scratch" (a less certain or maybe more legally hazardous route).

It's ironic that the start up of the WHA could really help the NHL with it's labor problem.

I don't think the proposal the NHL heard during the BOG meetings was ever that seriously entertained but you can be sure that a big part of the pitch was the timely discussions/education of the merits of such a structure to deal with the labor problems. It is likely that this proposal was leaked purposely to shake the union and it's members. And it should because of it’s merits and possibilities.

Excellent post.

Apparently this offer has been on the backburner for over a year. The fact that the NHL choose to make it public now was clearly a message to the PA. I especially love the fact that the PA forming a league or signing up with the WHA allows the NHL to restructure without fears of anti-trust action. They don't even need an outside buyer if they are in direct competition with the WHA.

Time to negotiate Bob.

 

[Prof_it]

Does anyone else feel that this offer poses as many questions about the owners as it does the players? Sure, if this deal were to happen, the PA would be negotiating with a single entity capable of controlling costs for the entire league. But for the league, there is now a group interested in buying you out largely because you have mismanaged your asset. They specifically cite the needs to share revenues across all franchises, as well as control costs. Shouldn't that be a wakeup call to the owners that maybe they ought to consider revenue sharing, and on a larger scale than what they have proposed.

IMO this offer divides the owners just as much as it would scare the players. Illitch has already come out and said that he won't be selling, i'm not sure that would be a consensus throughout the league. Read more from the Detroit Free Press

 

[Boltsfan2029]

The point on the arenas just to be clear is that the banks who currently finance them with mortgages would probably love the deal. Risk for them goes down because they have their hooks into a giant outfit and the labor situation that has been killing the league is nailed down.

I understand what you're saying, it's just that this scenario obvously wouldn't apply to all the teams/buildings.

 

[SENSible1*]

Interesting quote

"It's taking the National Hockey League and its 30 teams and operating it as any large corporation does with each team essentially being a division of one company," Game Plan chairman Robert Caporale said on WBZ radio in Boston. "We would keep in place team management, team presidents, the GMs. They would be completely autonomous."

source

Another hint of things to come?

 

[Jarqui]

And this story just in today ...

WHA ramping things up
Now, to help prove the WHA is for real and create awareness, Smith says the league will host an invitational tournament that runs from May 19 to June 3. Some details remain to be finalized, but here is their big-picture vision:

• A six-team, winner-take-all tournament, with a total purse of $2 million (U.S.); each participant will receive a $20,000 appearance fee.

• Early games will be held at Copps Coliseum in Hamilton and Ricoh Coliseum in Toronto, with later games to be staged at a venue on Canada’s West Coast.

[sarcasm]I think it's darn nice of the Leafs to let them play in Ricoh to help them get going, don't you ?[/sarcasm] :lol

 

[dakota]

And this story just in today ...

WHA ramping things up
Now, to help prove the WHA is for real and create awareness, Smith says the league will host an invitational tournament that runs from May 19 to June 3. Some details remain to be finalized, but here is their big-picture vision:

• A six-team, winner-take-all tournament, with a total purse of $2 million (U.S.); each participant will receive a $20,000 appearance fee.

• Early games will be held at Copps Coliseum in Hamilton and Ricoh Coliseum in Toronto, with later games to be staged at a venue on Canada’s West Coast.

[sarcasm]I think it's darn nice of the Leafs to let them play in Ricoh to help them get going, don't you ?[/sarcasm] :lol

I don't see Wetcoaster shooting down your posts... is the reason why because it is all legal?

 

[Jarqui]

I don't see Wetcoaster shooting down your posts... is the reason why because it is all legal?

Only Wetcoaster, who I respect, have enjoyed reading and have learned plenty from, can provide his opinion on this.

I would maybe characterize it better as a legal and financial minefield rather than merely "legal?". They’ll have to be careful when, where and how they step. The NHLPA may well try to throw legal action in their way to muck it up. In any legal dispute, all a lawyer can usually tell you is what your chances might be. It is not often that they can they say with absolute certainty, how it will all turn out.

My feelings are that there is a legal way based on very general principles but I haven’t mapped out the detailed legal and financial minefield. If we hear from Wetcoaster, it will be to bring to our attention where some of the legal mines are buried in that field. My response to that would be to look for the legal steps around those particular mines - they're likely to exist.

Having said that, there was a group in front of the BOG this week giving them $3.5 billion reasons why they think that there is a way to do this. You can be sure that they’ve done some very substantial legal and financial homework to map out that minefield before delivering their offer. They're betting a lot of dough that they are right.

 

[me2]

Keep dreaming Wettie.

They would have little difficulty getting this one past the courts.

If they started the league from scratch they'd probably get away with it.

If the NHL folded and was sold as assets they'd probably get away with it.

As it stands, merging competiting entities to form just one sets of all sorts of alarm bells. I'd back Wetcoaster on this one as it stands.

 

[me2]

It's ironic that the start up of the WHA could really help the NHL with it's labor problem.

The WHA would have to be a major competitor to the NHL before the govs would let the NHL merge into a single entity. It would take some thing like the NHL folding.

 

[A Good Flying Bird*]

what the hell? I can't see all 30 teams agreeing to sell.... obviously some would get more than others, but still....


that averages out to 116million per team, right? did I do that math right?


jesus, this just took a bizzare turn...

$3.5 Billion?
Divided by 30?

100 Million average?
Not sure how this would work, with some teams being worth $200 and $300 Million?
And how about owners who own arenas? Or how about teams that are basically subsidiaries of cable companies?
I don't see how this could work at all.

Sounds like a scam, or a scare tactic.
Given the caliber of people who've owned NHL franchises over the years, I'll go with scam.

 

[A Good Flying Bird*]

Seems like your understanding is more than a little flawed.

This move would simply be redefining the existing franchise system into one with localized ownership.

They would not stop other leagues from hiring hockey players.

They would not stop other hockey leagues from forming.

They would not stop other sports from competing for the consumers dollars.

This would not constitute a monopoly.

Companies have been stripped apart by antitrust laws for far less.
Look at what's happened historically.

 

[shakes]

$3.5 Billion?
Divided by 30?

100 Million average?
Not sure how this would work, with some teams being worth $200 and $300 Million?
And how about owners who own arenas? Or how about teams that are basically subsidiaries of cable companies?
I don't see how this could work at all.

Sounds like a scam, or a scare tactic.
Given the caliber of people who've owned NHL franchises over the years, I'll go with scam.

The Leafs are worth $280 million US.. Tannenbaum or Peddie (I'm not sure which) said that the offer was not even close to something they would even consider, if they were to consider it at all.

Maple Leaf Sports & Entertainment, which owns the Maple Leafs, Toronto Raptors and the Air Canada Centre, is considered the one of the most profitable sports and entertainment properties in North America.

For those who said the buildings would be included or transfered, the Raptors play out of the same building. You think MLSE is going to want to give up 2 licences to print money? Give your head a shake. The ACC and the Leafs are worth more than a quarter of a billion dollars and they are just going to up and sell.. right.

And for the person who said the owners who wanted out would just take the money and run while the rest would buy back in. Doesn't look like that would happen either.

"It's taking the National Hockey League and its 30 teams and operating it as any large corporation does with each team essentially being a division of one company," Game Plan chairman Robert Caporale said on WBZ radio in Boston. "We would keep in place team management, team presidents, the GMs. They would be completely autonomous.

 

[Jarqui]

Here's a little bit on what happened to MLS when it faced an antitrust suit from it's players:
Court Rules MLS a 'Single Entity' Barring Antitrust Claim
Boston, April 20, 2000 -- In a ruling that all but dismisses a longstanding antitrust suit against Major League Soccer (MLS), a federal judge concluded that the league is a "single-entity" exempting it from Section 1 of the Sherman anti-trust law. That section prohibits "contracts or combinations by two or more" in restraint of trade.

In his 25-page decision, U.S. District Court Judge George O'Toole ruled that MLS cannot be liable under section 1 because that statute only applies to "two or more" conspiring to restrain trade. He added that because MLS is structured as a limited liability company with "owner-investors," rather than separate and distinct team owners, it is not within the purview of the statute.

There was an appeal of that decision which was either lost or dropped :
Nov, 2004: MLS, union reach tentative agreement
The negotiations began shortly after the union was certified in April 2003 and almost 2 1/2 years after the players lost their antitrust suit.

So a single entity doesn't have an antitrust issue as brought by the MLS players because of it's structure.

The big challenge for the league would be how to legally get from the structure that they are in, into that single entity structure. They would definitely be up for some sort of antitrust review if all 30 teams were purchased and I believe that they have to file documents to disclose the sale for antitrust review.

Presumably, these guys who made the pitch to the NHL must know what those "legal step(s)" are.

 

[Jarqui]

The Leafs are worth $280 million US.. Tannenbaum or Peddie (I'm not sure which) said that the offer was not even close to something they would even consider, if they were to consider it at all.

Assets, revenue and markets would drive the price - not the average $117 mil

For those who said the buildings would be included or transfered, the Raptors play out of the same building. You think MLSE is going to want to give up 2 licences to print money? Give your head a shake. The ACC and the Leafs are worth more than a quarter of a billion dollars and they are just going to up and sell.. right.

If they're selling to a new corporation, they would own a piece of that could be more attractive financially for their invest ment ? Why not ? They don't have to sell the ACC. They can continue to lease to the Leafs as they do now.

And for the person who said the owners who wanted out would just take the money and run while the rest would buy back in. Doesn't look like that would happen either.

I don't think the 3rd party offer will fly unless they pay them a lot more money.

 

[oil slick]

It is not just consumer protection it is also to protect against salary suppression.

The Canadian Competition Act (our antitrust law) spells out in the statute what the US courts have developed over the years in various cases.

Antirust law promotes competiton - this proposal lessens it.

Is it really as cut and dry as you make it sound though? I really don't know as much about it as you, but from talking to lawyer friends/family, they think that one might be able to reasonably argue that the antitrust laws might not apply. At least they claim it is not cut and dry. Mind you, I suspect you have more familiarity with this.