Loading ...
Sorry, an error occurred while loading the content.

Re: [hockhist] Re: Bid to buy entire NHL

Expand Messages
  • Michael Levin
    Today¹s Wall Street Journal has article on Bain & Co.¹s offer for the NHL. And the bid is a stalking horse, not to mention one of the greatest negotiating
    Message 1 of 18 , Mar 4, 2005
    • 0 Attachment
      Today¹s Wall Street Journal has article on Bain & Co.¹s offer for the NHL.
      And the bid is a stalking horse, not to mention one of the greatest
      negotiating ploys in the history of labor/management.

      Gary Bettmen is telling the union, ³if you do not give us a salary cap, then
      we will sell the league for $3.5 billion. And the new owners will institute,
      a more draconian CBA then anything we have offered.²

      The last time a league sold itself to a single owner, the league (CBA) ended
      up in bankruptcy auction. The CFL wisely rejected a bid from Vince McMahon
      in the late Œ90s when that loop was trying to get off its financial death
      bed.

      Single entity leagues work best in the start up phase and when there a few
      teams. MLS and WNBA moved away from that model in the past 2 years. So,
      scale of operation may have something to with it. In short, the NHL is too
      old, too large with too many teams to seriously consider the Bain offer.
      What to make of the bid then? It¹s a stalking horse.


      [Non-text portions of this message have been removed]
    • Michael Poplawski
      ... For whom? The players or ownership? ... Oh, please. How do we know that? Did the new ownership group discuss what kind of agreement they wanted to
      Message 2 of 18 , Mar 4, 2005
      • 0 Attachment
        On Fri, 04 Mar 2005 15:23:30 -0600, Michael Levin <michael.levin@...> wrote:
        >
        > Today¹s Wall Street Journal has article on Bain & Co.¹s offer for the NHL.
        > And the bid is a stalking horse, not to mention one of the greatest
        > negotiating ploys in the history of labor/management.

        For whom? The players or ownership?

        > Gary Bettmen is telling the union, ³if you do not give us a salary cap, then
        > we will sell the league for $3.5 billion. And the new owners will institute,
        > a more draconian CBA then anything we have offered.²

        Oh, please. How do we know that? Did the new ownership group discuss
        what kind of agreement they wanted to negotiate with players?
        Draconian is what we saw the past six months, where players decided to
        forego about $1 billion in salaries.

        > Single entity leagues work best in the start up phase and when there a few
        > teams. MLS and WNBA moved away from that model in the past 2 years. So,
        > scale of operation may have something to with it. In short, the NHL is too
        > old, too large with too many teams to seriously consider the Bain offer.
        > What to make of the bid then? It¹s a stalking horse.

        What have I learned? If the bid is related to someone trying to earn a
        a return on their money, it clearly shows that gains are expected,
        either through operations or through asset appreciation. I'm guessing
        that a new ownership group sees the potential of sharing revenue among
        clubs (as a single entity, in this case).

        In any case, the term stalking horse, as I understand it, is something
        used to mask a purpose. If anything, this could be seen as a players'
        ploy: the owners were asked what the NHL brand was worth. It's more
        than $3.5 billion and the knowledge that they wouldn't have to live
        through this again.

        --
        Mike
      • Michael Levin
        ... Since the league has entertained an offer to sell the league, the negotiating ploy is by management. The players could respond by announcing they were
        Message 3 of 18 , Mar 4, 2005
        • 0 Attachment
          On 3/4/05 4:52 PM, "Michael Poplawski" <michael.poplawski@...> wrote:
          > For whom? The players or ownership?
          Since the league has entertained an offer to sell the league, the
          negotiating ploy is by management. The players could respond by announcing
          they were creating a player's league ALA the Federal League, which was
          started by baseball players as alternate to the National and American
          leagues. I doubt the league would take such a threat seriously.

          > Oh, please. How do we know that? Did the new ownership group discuss
          > what kind of agreement they wanted to negotiate with players?
          > Draconian is what we saw the past six months, where players decided to
          > forego about $1 billion in salaries.
          The players cannot act in a draconian manner. Players could be characterized
          as dumb, misguided, tough, determined, but not draconian. The NHL's offers
          with a salary cap or a luxury tax or whatever measure meant to place a
          ceiling on spending can be characterized as Draconian. Proposed budgets are
          characterized as Draconian. The willingness to accept such budgets are not.

          In the final two sentences of the third paragraph, Wall Street Journal
          reporters Stefan Fatsis and Dennis K. Berman write, "If successful, a sale
          would convert the NHL from a collection of 30 individual franchises to
          what's known in the sports industry as a single entity. Such centralized
          ownership... significantly reduces the free-market competition for players
          that has characterized hockey and other sports for decades."

          By selling to Bain and Co., the NHL would immediately institute a salary
          cap. Given the nature of leverage buyouts (LBO), which place an emphasis on
          current cash flow, to pay the debt generated from the LBO, the new owners
          will enforce a salary cap lower than the $42 million last offered by the
          league. I would characterize a reduced cap as Draconian.

          >
          > What have I learned? If the bid is related to someone trying to earn a
          > a return on their money, it clearly shows that gains are expected,
          > either through operations or through asset appreciation. I'm guessing
          > that a new ownership group sees the potential of sharing revenue among
          > clubs (as a single entity, in this case).
          The single ownership structure sounds closer to the NBDL and CHL models and
          a lot less like the MLS and WNBA, which had franchise operators and limited
          revenue sharing. In the former, a general manager or president reports to a
          league representative. There is no revenue sharing.

          Unless U.S. tax law has changed in the past 3 years, Bain and Co. will take
          $1.75 billion in deprecation expenses. If they follow the LBO approach, most
          of the purchase price will be debt. Once the sale goes through, expenses
          will pared greatly while trying to keep revenue flat or growing. Cash will
          pay down debt. At the end of the deprecation, the operation will be sold for
          profit. Again, this is standard LBO stuff.

          > In any case, the term stalking horse, as I understand it, is something
          > used to mask a purpose. If anything, this could be seen as a players'
          > ploy: the owners were asked what the NHL brand was worth. It's more
          > than $3.5 billion and the knowledge that they wouldn't have to live
          > through this again.
          Since Bain and Co. approached Gary Bettman about a buyout, unless the
          players called Bain first, this appears as a management ploy.

          Stalking Horse:
          Company A wants to sell a business unit to company B, but B does not want to
          pay A's asking price. Negotiations stall because B believes that A has no
          realistic alternatives but to sell the unit to B. A then goes to company C
          and entices an offer, usually close to want A's asking price. A really has
          no desire to sell C. B is now faced with a choice: force A to sell C, force
          A to withdraw the business unit, or raise its bid for A's business unit.

          Company C's bid is a stalking horse. It is not a common negotiation ploy,
          but it is not unheard of. It usually occurs when management is having
          difficult getting bidders to meet its asking price.

          Why is Bain and Co. a stalking horse? According to the Journal article, Bain
          made a pitch to Bettman at the end of the 2003-04 season. Bettman, not the
          players, asked Bain to make a presentation to the owners. On Tuesday, owners
          sat through a 30 minute (yes, 30 minute) presentation.

          I have sat through vendor presentation that lasted longer 30 minutes. I have
          done pitches that lasted longer than 30 minutes. 30 minutes? That is not a
          serious presentation. That is: Hi, how are you? Do you think after 30
          minutes, any of the owners were taking this seriously? If this were serious,
          there would have been days and days of discussion. And if this were serious,
          Bettman would not have sat on this proposal for nearly a year. It is a
          stalking horse bid, nothing more, nothing less.
        • john.serrati@johnabbott.qc.ca
          In terms of the different development of European and North American pro sports, that was very well Bill, and I agree with everything that you said. An
          Message 4 of 18 , Mar 4, 2005
          • 0 Attachment
            In terms of the different development of European and North American pro
            sports, that was very well Bill, and I agree with everything that you
            said.

            An interesting example of the 'North American-isation' of sports in Europe
            that you were talking about comes from 1997. I remember Arsenal
            threatened to sue a referee and the English Premiere League because of a
            botched call that awarded Liverpool a bogus penalty kick in a league
            match. As a result, Liverpool won, and Arsenal was out the one point that
            a draw would have given them. This one point was all that they needed to
            finish second and qualify for the Champions League. As they missed
            qualification by finishing third, they claimed that the one botched call
            cost them millions of pounds in losses that play in the Chapions League
            would have brought. And thus claimed they were looking into a lawsuit.
            It went nowhere of course, but it's still a great example as you would
            have never seen such threats in Europe in the 70s or even 80s!

            Also, for amateur and pro sports in North America, I can see a pattern in
            that the longer a sport remained amateur, the more entrenched it became a
            school level, as that represented the highest level most could hope for
            without serious pay. Football, basketball, and women's hcokey are all
            relatively huge at college level, and remained amateur for significant
            amounts of time. Hockey (at least in Canada) and baseball did not are are
            thus college leagues are not really that big.

            John
          • Marc Foster
            ... I know that Ben Rochester, formerly with the Dallas Freeze, was a big sour grapes guy that threw around a lot of complaints after he left the league. In
            Message 5 of 18 , Mar 5, 2005
            • 0 Attachment
              > From: "William Underwood" <wausport@...>
              >
              > I confess that I don't remember. All I know is that there were
              > complaints by guys that worked in that league that it seemed that the
              > old management in the centralized days seemed to conspire to build up
              > Oke City. And one of the things that they said was that it seemed that
              > trades often seemed lop sided with Oke City. But I really don't know
              > which instance to which they were referring. And could it have been sour
              > grapes?

              I know that Ben Rochester, formerly with the Dallas Freeze, was a big sour
              grapes guy that threw around a lot of complaints after he left the league.
              In the first season Dallas was eliminated in the semis by Tulsa and in the
              second season in the semis by Wichita in series that both went seven games
              and had questionable issues.

              > Sure. I was in a different league, did not scout theirs and so I
              > wasn't all that in the loop there and had to go by what they said. And
              > it was useful ammo against their league might I add for other leagues in
              > attacking their credibility. The perception was everything...it could
              > happen, maybe it did happen, so and so claims it has...so do you REALLY
              > want to deal with these folks? Wouldn't you RATHER own a team in this
              > other league? Do you (or your clients) REALLY want to sign in a league
              > like that? It just leant itself to suspicion and you had ex CHL coaches
              > in the other leagues and elsewhere backing it up...

              Funny thing about the perception is that the OKC people though the bias was
              towards Tulsa, since that was where the league was based. Meanwhile the
              Tulsa people thought there was a bias AGAINST them for the same reason.

              > But when you look at both what you and I said it serves my point. You
              > say that they violated cap rules but were never taken to task for it.

              Everyone violated cap rules. Some were better (worse) at it than others.
              There's not much question that OKC had a lot of extra "soft" money floating
              around from the BC and individuals, once things took off in Wichita and San
              Antonio, their soft money grew as well.

              Marc
            • William Underwood
              Absolutely true, but the outside perception was that Oke City were the big culprits. And the interesting thing is that you seem to be saying that this
              Message 6 of 18 , Mar 5, 2005
              • 0 Attachment
                Absolutely true, but the outside perception was that Oke City were the
                big culprits. And the interesting thing is that you seem to be saying
                that this structure left the sense of a possible "fix" in more than one
                place, even Oke City itself...thus the concern about this "integrity"
                facet of a centralized structure.

                At the major leaguer level you would have to be DOUBLY careful that it
                didn't happen. I can see it now, any time a US team got the best end of
                a deal with a Canadian team you would have the conspiracy folks at work
                24 hours a day in Canada and in the US whenever the Rangers got the
                better end of a deal. Heck if a Canadian team failed to win the Cup in
                say the first 5 years, or make the final, the press would go into over
                drive...even it was all on the up and up.

                -----Original Message-----
                From: Marc Foster [mailto:mfoster@...]
                Sent: Saturday, March 05, 2005 9:08 AM
                To: hockhist
                Subject: [hockhist] RE: Re: Bid to buy entire NHL


                > From: "William Underwood" <wausport@...>
                >
                > I confess that I don't remember. All I know is that there were
                > complaints by guys that worked in that league that it seemed that the
                > old management in the centralized days seemed to conspire to build up
                > Oke City. And one of the things that they said was that it seemed that
                > trades often seemed lop sided with Oke City. But I really don't know
                > which instance to which they were referring. And could it have been
                sour
                > grapes?

                I know that Ben Rochester, formerly with the Dallas Freeze, was a big
                sour
                grapes guy that threw around a lot of complaints after he left the
                league.
                In the first season Dallas was eliminated in the semis by Tulsa and in
                the
                second season in the semis by Wichita in series that both went seven
                games
                and had questionable issues.

                > Sure. I was in a different league, did not scout theirs and so I
                > wasn't all that in the loop there and had to go by what they said. And
                > it was useful ammo against their league might I add for other leagues
                in
                > attacking their credibility. The perception was everything...it could
                > happen, maybe it did happen, so and so claims it has...so do you
                REALLY
                > want to deal with these folks? Wouldn't you RATHER own a team in this
                > other league? Do you (or your clients) REALLY want to sign in a league
                > like that? It just leant itself to suspicion and you had ex CHL
                coaches
                > in the other leagues and elsewhere backing it up...

                Funny thing about the perception is that the OKC people though the bias
                was
                towards Tulsa, since that was where the league was based. Meanwhile the
                Tulsa people thought there was a bias AGAINST them for the same reason.

                > But when you look at both what you and I said it serves my point. You
                > say that they violated cap rules but were never taken to task for it.

                Everyone violated cap rules. Some were better (worse) at it than
                others.
                There's not much question that OKC had a lot of extra "soft" money
                floating
                around from the BC and individuals, once things took off in Wichita and
                San
                Antonio, their soft money grew as well.

                Marc





                To unsubscribe from this mail list, send a blank message to
                hockhist-unsubscribe@yahoogroups.com

                Yahoo! Groups Links
              Your message has been successfully submitted and would be delivered to recipients shortly.