Balsillie's best shot still to come
BlackBerry czar has millions left to offer
September 09, 2009
Steve Milton
http://www.thespec.com/Sports/article/631342
Jim Balsillie has already climbed to $242.5-million US and he hasn't pulled out the extension ladder yet.
So how much is an National Hockey League team in Hamilton worth, to Balsillie and to anyone else? And could the NHL get anywhere near that much in either of Gary Bettman's two new favourite cities, Kansas City and Winnipeg? (No.)
One widely accepted business principle holds that an asset is worth what, and only what, someone will actually pay for it. A second is that, in long-term negotiations, you never lead with your best offer.
Being businessmen, and therefore disciples of Principle 2, NHL owners and executives may have felt some awe, but not shock, in Balsillie's $30-million US hike in his bid for the bankrupt Phoenix Coyotes. They knew a higher bid was coming, and they know others are likely, even before the team is auctioned off at the end of the week. The NHL has always known that, if this thing gets down to a straight dollar auction, no one else could compete with Balsillie.
Why not? Go back to Principle 1. For reasons known mostly only to him, Balsillie is single-minded about getting a team in Hamilton and is clearly prepared to go beyond common business sense to do so.
So, even though his own expert, the esteemed Massachusetts sport economics Prof. Andrew S. Zimbalist, says a team in Hamilton is worth from $175-million US to $184-million US, Balsillie is already at $242.5-million US and, presumably, counting.
Zimbalist was making the pure business analysis: how much a team here is worth (without relocation fees) to the average, dispassionate buyer, expecting to break even or make some profit.
But Balsillie is not dispassionate about this cause. He's emphatically the opposite. So it's impossible to know how high he'd be willing to go. And, when you ask his people for the ceiling on his Hockey-in-The-Hammer fund, they look at you cross-eyed.
Knowing all this, and truly believing in several other business principles, the NHL is fighting this battle mostly on other grounds: Contract law, specific limitations of bankruptcy law, Balsillie's character, sovereign business rights.
The NHL, by court order, has proposed a relocation fee: from $105 to $195 million. Zimbalist's estimate, based on the provisions of the NHL constitution, is somewhere under $13 million. Even Balsillie knows that's absurdly low but, again, we refer you to Principle 2.
So the relocation fee is likely where the next bump in the Balsillie bid will occur, unless Judge Baum sets an exact figure after tomorrow morning's hearings on that issue.
So here's what an NHL team in Hamilton seems to be worth to Balsillie: His $242.5-million US bid, plus a year's losses in Phoenix, if the NHL drops objections to him. That comes to $272-million US or more, without a relocation fee. If the relocation fee is on the low end of the NHL estimate, add another $110-million US or so. That puts a Balsillie-owned Hamilton team at just under $400-million US. Without any arena costs.
Howard Blum, of Sports BizNews, wrote earlier in the week that "Diamond Jim" (his term) pays $242.5 million for the team, $35 million in operating losses and $100 million to relocate. Then, Blum concludes: "He Wins. $377 million. DONE DEAL."
Add the $160 million (financier as yet unknown) to doll up Copps Coliseum and that's very close to the $600 million that The Spec has always insisted would be the floor on the total startup cost of any expansion or relocation team in the GTA. That sounds ridiculously high, but that's hockey in this market. And consider that it's also without the multimillions Balsillie has spent on this pursuit since his Pittsburgh Penguins exercise three years ago.
One prospective bidder for a second team right in Toronto estimated that a team there could be worth as much as $800 million, if the owners could be guaranteed the same income stream the Leafs now enjoy.
That isn't likely to happen, especially here -- one of the recurring themes of Balsillie's bid is more competitive ticket prices -- but when you add it all up, a $600-million total cost for a team at Copps isn't out of the question. That jibes with the high end of a study by Chicago-based SportsCorp Ltd., that a team here would have a market value of $400 to $600 million.
It seems to us, though, that only Balsillie would live at the high end of that spectrum.
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