Katz sweetens offer for Oilers
Bid for NHL team bumped to $150M
Dan Barnes
The Edmonton Journal
Friday, June 15, 2007
EDMONTON - It's a month old and Oiler owners still consider it an informal bid, but
Edmonton billionaire Daryl Katz's offer to purchase the team now stands at $150 million Cdn, an increase of $5 million on his original gambit.
The Edmonton Investors Group, which owns the National Hockey League franchise, have discussed Katz's proposal but will not respond to it until they believe it constitutes a formal offer to purchase.
"There was talk about it (at a Thursday meeting of EIG), but because there was no offer, there was really nothing to talk about," said Cal Nichols, official spokesperson and board chair.
"It was a number on a piece of paper. It may have been on two pages, but an offer has to have all the conditions and subject-tos. It was largely hypothetical and conjecture. It wasn't why we met."
It was actually a three-page offer signed by Katz, but Nichols and the remainder of the EIG board members did not consider it substantive enough to distribute to all shareholders.
They met instead to vote on re-establishing the value of the franchise at an arbitrary $125 million, up from $96 million, a proposal that received almost unanimous acceptance. That means the retirement value of each of the 7,492 shares jumped from $12,830 to $16,683. This was done in order to facilitate the fair sale of shares, should any of the 34 shareholders wish to do so.
"We met in order to stay current on our shareholder agreement. Our objective was to go about our business," said Nichols.
He did confirm the $150 million figure as accurate but called it "adjustable" since a formal purchase price would have to allow for outstanding loans, taxes payable and deposits on season tickets. It's also known the offer is for shares rather than the asset itself, which means its value might be considerably higher than $150 million, given potential tax benefits to EIG shareholders.
Nichols also said the $150 million was exclusive of the money Katz has already committed to secure the naming rights for Rexall Place, believed to be $15 million over five years.
"That's a separate issue."
Katz's escalating interest in the franchise has sent reverberations through the city and particularly the boardroom of EIG, which has owned the team since 1998. Nichols said each shareholder met recently with board members to ascertain their feelings on a potential sale of either the team or individually held shares.
"We're trying to manage the collateral damage within the community and within our group," he said.
There is no doubt Katz's pursuit of the team has piqued the interest of some owners who are now willing to sell, a fact Nichols admits. However, EIG was not soliciting offers and he doesn't foresee the required 66.7-per-cent majority favouring a sale of the franchise, which was purchased from the Alberta Treasury Branch for about $100 million.
"This was unsolicited. It came out of the blue," said Nichols. "Never had there been a suggestion this group wanted to sell, or that the team was for sale. Even if it was a formal offer, it would require (66.7 per cent) of shareholders to agree to sell the asset."
Phone calls to other shareholders, including Bruce Saville and Ron Hodgson, were not returned Thursday. A spokesperson for Katz was contacted but would not comment on the offer.
Rather than a sale to Katz, Nichols envisions as "one probability" some consolidation of the company.
"People agreeing to sell their shares (to other investors or the company treasury) at a price they can live with," he said, adding that changes in the makeup of ownership are inevitable given the diverse nature of the group, the fact they have been together for a decade and the franchise is once again on solid ground financially.
"We've been together 10 years. Age becomes a factor. Already there have been two deaths in the group. Some don't live in the area. Some say 'I did my thing, I'm proud and happy that I did and maybe it's time to let it work more easily.' "
But he believes a majority of owners are still happy to be involved with the NHL.
"Some in our group are using a brand relationship (between their other businesses and the Oilers) just like the pursuer (Katz) wishes to do. There is a resistance (to selling out)."
There is no doubt the Oiler owners have enjoyed the benefits of being associated with a high-profile sports franchise. But it came at a cost of money and time. The owners borrowed $40 million and put up $60 million of their own money in 1998, then increased that with a $14-million cash call in 2001 to cover operating losses.
Starting with the first season ticket drive back in the gory days of the mid-1990s and continuing through the messy transition from former owner Peter Pocklington and the equally unpleasant departure of general manager Glen Sather, nobody has spent more time on the franchise than Nichols. He has to do what's in the best interests of the group, with one eye on his own situation.
"Eventually you have to move on," he said. "The question is, when is the right time? Many in our group are comfortable with a business/family succession plan. Those are the kinds of options guys in our group have.
"I've personally put a lot of sweat equity into this and to say it doesn't matter anymore, let it go, it makes it somewhat emotional. And yet I do speak for a large group and I have to be mindful of everyone's preference, goals and objectives. On any given day, there are 34 of them."
dbarnes@thejournal.canwest.com
© The Edmonton Journal 2007
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I've got to ask ... even @ $190M aren't the Oilers undervalued? How is it that a town like Edmonton with a long, proud, hockey history and a town which lives and breathes the Oilers have a team which is worth (on paper @ least) so much less than Jim Balsillie is willing to pay for the Nashville Preditors in a town which has no hockey tradition tradition and which could (relatively speaking) give a crap about whether the team stays or not?
... don't laugh anything is possibly in this era in the NHL
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