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SBD/Issue 172/FranchisesPrint All
NWD Says They Have No Involvement With
Group Of Investors Buying Share Of Cavs
BEEFING UP THE ROSTER: The PLAIN DEALER's Windhorst noted Huang and "several of his partners were in Cleveland and attended" Eastern Conference Finals Games One and Two last week against the Magic. The "direct impact of the move is securing the future of the franchise, which has been in a minority ownership flux for the last couple years as it loses millions in attempting to build a championship-quality team." The deal "will not only mean an injection of capital but will open the Cavs to business in China." Windhorst noted the move, which has been "kept mostly secret in America, is being supported by the NBA as they have encouraged development in China." Meanwhile, another effect of the deal is "how vital this new link" could be for Cavaliers F LeBron James, "providing a huge tie-in with an economy James is eager to tap." If NBA owners approve the deal, it "could help to remarkably strengthen James' relationship with the Chinese fans and consumers that he's been working to reach for the last four years." James and Nike, "by far his largest sponsor, have been on a mission to create a bond with the Chinese over the last three years," and becoming the Michael Jordan of China "from a marketing standpoint would allow James to reach his goal of someday becoming the first billionaire athlete" (Cleveland PLAIN DEALER, 5/24).
A WELCOME INVESTMENT: In N.Y., Barboza & Schmidt wrote the deal "signals the first significant investment in a major American sports franchise by investors from China." The sale "may be the most ambitious move yet in an American sports landscape full of leagues, teams and players striving for a foothold in the expansive and largely untapped Chinese marketplace." Barboza & Schmidt noted the move will be "interpreted as an effort by the Cavaliers to entice James, who will become a free agent after next season, to stay in Cleveland and capitalize on the franchise's connections in China" (N.Y. TIMES, 5/26). In Akron, Pat McManamon wrote about 10 years ago, "we all got mad when Japanese interests bought U.S. properties, like Rockefeller Center." However, now we will "probably all be happy if Huang [injects] Chinese money into the Cavs" because it "might help the Cavs keep LeBron." Meanwhile, McManamon noted the revelation that the Cavaliers have "lost millions in the past couple years" is "pretty stunning -- especially looking at the Q every night, with all the sellouts and all the advertising and all the sponsorship" (OHIO.com, 5/24).
Dominating Chinese Market
A Top Priority For James
HOW IT AFFECTS THE NBA: In N.Y., Mitch Lawrence noted although the NBA is "eager to grow its brand in China and has been quietly looking for foreign investors to buy into franchises, it is not known if the league would view the proposed deal and the marketing ramifications as a form of cap circumvention that would give the Cavs an unfair advantage" over other teams (N.Y. DAILY NEWS, 5/25).
SOMETHING TO GET USED TO? Former Portfolio Magazine Wall Street Editor Jesse Eisinger said it is "good" for both the NBA and the U.S. "that the Chinese are buying into assets." Eisinger: "This is our greatest American export, sports and culture, and I don't think there's going to be any controversy." CNBC's Dennis Kneale: "China is going to be investing more, and the more they invest in the U.S., the better it is. It just aligns their interest more with ours" ("CNBC Reports," CNBC, 5/26).
No Names Beyond Jordan Have
Emerged As Potential Buyers
SHOULD JORDAN RULE? In Charlotte, Tom Sorensen writes nothing Jordan has accomplished "indicates he is capable of running a major-league franchise." Sorensen: "The Bobcats (the organization, not the team) have been so abysmal for so many years that they need to start over. ... I hope Michael and his supposed super secret investment partners are not sitting in the shadows, waiting to see how low [Johnson] will go before they pounce" (CHARLOTTE OBSERVER, 5/27). But the OBSERVER's Scott Fowler writes Jordan is the “logical choice -- the insider with star power who also happens to be the best basketball player ever.” Fowler: “Jordan could be an excellent owner if he makes a few changes to the way he does business. I certainly prefer him to an outsider with a big wallet and no deep ties to Charlotte.” What Jordan “needs to do is buy a controlling interest in the team” from Johnson, then he “needs to learn from” Panthers Owner Jerry Richardson (CHARLOTTE OBSERVER, 5/27).
GOOD NEWS FOR FANS: ESPN.com's John Hollinger wrote the Bobcats being on sale "has to be good news for their fans." The odds of the team relocating are "minuscule, as Charlotte has a new arena and a solid market, not to mention the fairly harsh penalties for departing," and whoever takes over is "almost certain to operate the team more competently" than Johnson. The new owner also presumably will not let Jordan "run the team from the 12th green or shut out the local TV audience, and he might even be encouraged to spend some money on players" (ESPN.com, 5/23).
TERMS OF A DEAL: The OBSERVER's Bonnell noted Johnson reportedly is "clinging to the idea he can recoup his initial investment -- about $330[M] -- as the current value of this team." But for reasons "both macro (go try to get a $300 million business loan in this economy) and micro (plenty of empty seats at most Bobcats home games), selling this team for a price Johnson would accept will be challenging." A source said that he would be "surprised if Johnson owned this team by the start of next season." But the source added that the price is "what could keep a sale from happening" (CHARLOTTEOBSERVER.com, 5/22). Meanwhile, Charlotte attorney Mac McCarley said new Bobcats owners "would be subject to all the same restrictions and guarantees" if the team is sold. McCarley, when asked if the team could leave Charlotte, said, "No. The city may seek an injunction to force the team to honor the commitment to play here, or can enforce liquidated damages of $200[M] in the first five years (2005-2010), $150[M] in years five to 10, and a declining balance going from $85[M] in year 11 down to $7[M] in year 25." McCarley noted the liquidated damage provisions are "guaranteed by the team and by Bob Johnson personally" (CHARLOTTE OBSERVER, 5/24).
Balsillie Says Important To
Have Resolution Before DraftMOYES-BALSILLIE SALES PROPOSAL TIMELINE5/28Deadline for notice6/1Deadline for Balsillie and Moyes to file a joint relocation application to NHL6/12Deadline for any competing bids to be filed6/12Deadline for NHL to advise court of BOG's position on relocation and Balsillie's application for membership6/17Deadline for filings ahead of June 22 hearing on relocation6/22
Hearing on relocation6/23 Deadline for NHL to provide BOG's vote on competing bidders' applications for membership6/24Auction in bankruptcy courtNHL SALES PROPOSAL TIMELINE6/22Decision on relocation7/7NHL application due for bidders interested in buying team7/28 Preliminary bid deadline in which bidders propose purchase8/11Qualified bid deadline in which bidders turn in purchase agreements8/25NHL BOG votes on approval of bidders8/27Auction in bankruptcy court8/29Sales hearing
TAKE IT OR LEAVE IT? In Hamilton, Milton & Peters report Moyes' timeline presented to the court "suggests that Balsillie will withdraw his $212.5[M] conditional offer for the club by the end of June rather than absorb an estimated $30[M] loss by the Phoenix club for the 2009-10 season." Moyes' filing states, "An expedited sale is necessary to maximize the value of Coyotes Hockey assets" (HAMILTON SPECTATOR, 5/27). However, NHL Deputy Commissioner Bill Daly in an e-mail said the league will “continue to oppose any sales process that contemplates a relocation for the 2009-10 season” (ARIZONA REPUBLIC, 5/27).
RUSH UP ICE: In Toronto, Kevin McGran reported Balsillie “has officially applied to the NHL to become a team owner.” A second application -- from Moyes -- to “move the team to Hamilton is expected to be filed” this week. If Balsillie “fails to gain approval, his camp believes it would have the basis for an antitrust suit” (TORONTO STAR, 5/25). In Hamilton, Steve Milton reported in a front-page piece Balsillie is “willing, if the [NHL] so desires, to forgo dipping into the league’s revenue-sharing pool.” Balsillie’s team is “ready to make that concession because they are confident the Hamilton market will offer enough support from an eager fan base to make it a profitable venture.” Balsillie spokesperson Bill Walker: “We anticipate operating profitably in Hamilton by bringing NHL hockey to the best unserved market in the world and therefore not drawing on revenue sharing under the CBA” (HAMILTON SPECTATOR, 5/25). In Toronto, Steve Simmons writes Balsillie “seems confident the judge will rule on relocation and is surprisingly optimistic that he will emerge successful this time, even if there is no indication he will be so rewarded in court.” Balsillie: “Our bid should stand on its own merits. … The judge said there will be an auction and he will rule on relocation. What more could we ask for?” Balsillie added that if he is “given the green light to purchase and move the franchise that it wouldn’t necessarily be called ‘Hamilton.’” Balsillie said he chose Hamilton to relocate to because “there is an arena there.” Balsillie: “That’s really important, even though we’d have to renovate it. If you can point to another arena that’s available (in Southern Ontario), I’m all ears” (TORONTO SUN, 5/27).
CREDIT CHECK: The TORONTO STAR’s McGran reported SOF Investments, the Coyotes’ “single-largest secured creditor,” has given its “qualified support” to Balsillie’s bid. SOF in court papers said it believes Balsillie’s bid “would result in substantial recovery of the amounts owed to the debtors’ creditors” (TORONTO STAR, 5/23). The PHOENIX BUSINESS JOURNAL’s Sunnucks & Casacchia note the team “owes more than $108[M] to its top 40 creditors and service providers, including media and broadcast partners, insurers, the Coyotes Ice Den practice facility and Aramark Corp., the team’s concessions provider.” The Coyotes owe FS Arizona “$261,438 for production costs from last season," while KAZT-Ind is listed as the "second-largest media creditor, with an unsecured claim of $72,750 stemming from fees the Coyotes paid the independent Flagstaff station to broadcast 20 games during the 2008-09 season" (PHOENIX BUSINESS JOURNAL, 5/22 issue).
BACKING A BID: In Phoenix, Craig Harris reports Sports Properties Acquisition Corp. CEO Tony Tavares was working with Bulls and White Sox Chair Jerry Reinsdorf to “buy the Coyotes one day before the team filed for bankruptcy protection.” Public records reveal the agreement was “signed May 4 with the city of Glendale,” though no purchase price was listed. Glendale spokesperson Julie Frisoni said that the city “had no knowledge or information if Tavares was representing an outside entity, including Sports Properties” (ARIZONA REPUBLIC, 5/27).
Molson Family's Bid For Canadiens Would
Not Involve Molson Coors Brewing Company
DEFENSIVE TRAP: The GLOBE & MAIL's Andrew Willis noted Canada-based telecom company BCE Inc. is "looking at playing defence by backing a bid" for the Canadiens, a "move that would keep rival Quebecor Inc. from seizing the prize." Sources indicated that BCE is "considering a minority role" in the bid by former Canadiens GM Serge Savard, and the "talk in Montreal business circles is that BCE ... would put up a maximum of [C$60M] for a franchise that is expected to fetch more than [C$400M] if it does sell." Quebecor Media Inc. President & CEO Pierre Karl Peladeau earlier this month confirmed that he is "in talks to buy" the team (GLOBEANDMAIL.com, 5/22). French-language newspaper La Presse cited sources as saying "both firms had formed consortiums to take over the Canadiens," and BCE is "working with the investment arm of a major Quebec trade union." But Quebec-based National Bank Friday said that it was "confident 'that the chance of BCE acquiring or even bidding for the Canadiens is very low.'" The bank cited what it said were "assurances from the firm that the team did not fit in with its main priorities" (REUTERS, 5/22).
Predators Suffering Cash Flow Shortage
After Not Making NHL Playoffs
PAR FOR THE COURSE: In S.F., Ray Ratto wrote the incident made Warriors officials and the team they are "gently running into the ground look petty, paranoid, manipulative and dishonest on top of already looking ignorant, irrelevant and self-aggrandizing." The problem with Ridder's comment "isn't that the Warriors shouldn't promote their side but that they're so spectacularly bad at it." On sites like WarriorsWorld, those with "other avenues of discourse on a given subject (the media, club officials, politicians, etc.) either announce themselves ahead of time or simply stay outside," and Ridder "crossed that line, no matter what his intentions might have been, and he made the organization, already known for its hypersensitivity to facts and criticism, look even more so." Ratto: "But to focus on Ridder is to miss the bigger picture" (S.F. CHRONICLE, 5/24). CNET.com's Chris Matyszczyk wrote, "You might think that Flunkster Dude has flunked the very first test of social media. You might think that someone who posts anonymously about honest, when himself being just slightly less than entirely honest about his interest in the matter, might just think about a career in politics" (CNET.com, 5/23). In California, Cam Inman wrote the comment was a "slimy way to drum up positive chatter on the Internet," and Ridder is "not a slimy guy, so I really fear what this will do to this reputation." But what Ridder did is "not all that uncommon in the mainstream media." Inman: "This is a wake-up call to blogs, everywhere: You are not off-limits from the propaganda teams often spew" (CONTRA COSTA TIMES, 5/22).
Burnley Will Earn A Minimum Of $47.9M
In TV Revenue In EPL Next Season
TOONED OUT: Newcastle Owner Mike Ashley yesterday "issued a personal apology for the 'catastrophe'" of the club's relegation from the EPL. Ashley: "Seeing Newcastle United relegated from the Premier League has been a catastrophe for us all. I fully accept that mistakes were made during this and previous seasons and I am very sorry for that" (LONDON TIMES, 5/27). In London, Paul Kelso reported Newcastle's relegation decreased the club's estimated value to about $143.8M. Ashley, who bought the club in '07 for about $214.1M, last year was seeking around $351.5M in a sale of the team, but sources indicated that Ashley now "would have to settle for no more" than $143.8M, "assuming a buyer could be found for a club about to taste the realities of life on short rations" (London TELEGRAPH, 5/26).
MORE STABILITY UNDER GLAZERS: ManU CEO David Gill said since the Glazer family acquired the team in '05, there is "stability, and long-term decisions can be taken." Gill said of the club's current debt of approximately US$797M and whether the current economic climate would affect future borrowing, "That borrowing was put in place on a long-term basis back in August 2006 and the club can service that debt easily. … There's no real pressure there. We've shown good growth in the commercial area since the takeover" (BBC.co.uk, 5/26).
Cowboys' New Stadium Will Not Have Naming-
Rights Partner When It Opens This Summer
INTEREST PICKING UP: The DALLAS BUSINESS JOURNAL's Katherine Cromer Brock reports the MLB Rangers' season-ticket sales and corporate sponsorships "were down this year, but with early success has come a resurgence of attendance and game revenue for the organization." Rangers Exec VP/Communications John Blake said that attendance at Rangers Ballpark hit 104,859 during the three-day series against the Angels from May 15-17, the "highest attendance for a three-day stretch since June 2007." As of May 18, season attendance at the ballpark was "485,873, up 28,265 year-over-year." Blake: "That's significant. We were starting at a lower base with the season ticket drop-off from last year. We were battling it for season tickets and hospitality, corporate suite rentals and nightly suite rentals." Silverman said that corporate ticket sales were "off less than 10%." But Blake said that game revenue this year has "seen a 6.4% increase from the same point in last year's season" (DALLAS BUSINESS JOURNAL, 5/22 issue).